Correlation Between Monster Beverage and Baidu
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Baidu at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Monster Beverage and Baidu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage Corp and Baidu Inc, you can compare the effects of market volatilities on Monster Beverage and Baidu and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Monster Beverage with a short position of Baidu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Baidu.
Diversification Opportunities for Monster Beverage and Baidu
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monster and Baidu is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Baidu Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baidu Inc and Monster Beverage is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Monster Beverage Corp are associated (or correlated) with Baidu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baidu Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Baidu go up and down completely randomly.
Pair Corralation between Monster Beverage and Baidu
Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.34 times less return on investment than Baidu. But when comparing it to its historical volatility, Monster Beverage Corp is 1.94 times less risky than Baidu. It trades about 0.08 of its potential returns per unit of risk. Baidu Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 164,400 in Baidu Inc on September 12, 2024 and sell it today you would earn a total of 13,400 from holding Baidu Inc or generate 8.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Baidu Inc
Performance |
| Timeline |
| Monster Beverage Corp |
| Baidu Inc |
Monster Beverage and Baidu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Baidu
The main advantage of trading using opposite Monster Beverage and Baidu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Baidu can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Baidu will offset losses from the drop in Baidu's long position.| Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Grupo Hotelero Santa | Monster Beverage vs. Grupo Carso SAB | Monster Beverage vs. Hoteles City Express |
| Baidu vs. Southwest Airlines | Baidu vs. McEwen Mining | Baidu vs. Verizon Communications | Baidu vs. Southern Copper |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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