Correlation Between Monster Beverage and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Costco Wholesale 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 Costco Wholesale 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 Costco Wholesale, you can compare the effects of market volatilities on Monster Beverage and Costco Wholesale 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 Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Costco Wholesale.
Diversification Opportunities for Monster Beverage and Costco Wholesale
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Costco is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Costco Wholesale in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale 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 Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale has no effect on the direction of Monster Beverage i.e., Monster Beverage and Costco Wholesale go up and down completely randomly.
Pair Corralation between Monster Beverage and Costco Wholesale
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 1.18 times more return on investment than Costco Wholesale. However, Monster Beverage is 1.18 times more volatile than Costco Wholesale. It trades about 0.19 of its potential returns per unit of risk. Costco Wholesale is currently generating about 0.13 per unit of risk. If you would invest 91,850 in Monster Beverage Corp on August 28, 2024 and sell it today you would earn a total of 19,015 from holding Monster Beverage Corp or generate 20.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Costco Wholesale
Performance |
| Timeline |
| Monster Beverage Corp |
| Costco Wholesale |
Monster Beverage and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Costco Wholesale
The main advantage of trading using opposite Monster Beverage and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Monster Beverage vs. Grupo Sports World | Monster Beverage vs. DXC Technology | Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Verizon Communications |
| Costco Wholesale vs. Hoteles City Express | Costco Wholesale vs. DXC Technology | Costco Wholesale vs. Verizon Communications | Costco Wholesale vs. Grupo Sports World |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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