Correlation Between Monster Beverage and Devon Energy
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Devon Energy 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 Devon Energy 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 Devon Energy, you can compare the effects of market volatilities on Monster Beverage and Devon Energy 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 Devon Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Devon Energy.
Diversification Opportunities for Monster Beverage and Devon Energy
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monster and Devon is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Devon Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Devon Energy 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 Devon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Devon Energy has no effect on the direction of Monster Beverage i.e., Monster Beverage and Devon Energy go up and down completely randomly.
Pair Corralation between Monster Beverage and Devon Energy
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.96 times more return on investment than Devon Energy. However, Monster Beverage Corp is 1.04 times less risky than Devon Energy. It trades about 0.08 of its potential returns per unit of risk. Devon Energy is currently generating about -0.06 per unit of risk. If you would invest 91,400 in Monster Beverage Corp on September 13, 2024 and sell it today you would earn a total of 16,300 from holding Monster Beverage Corp or generate 17.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Devon Energy
Performance |
| Timeline |
| Monster Beverage Corp |
| Devon Energy |
Monster Beverage and Devon Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Devon Energy
The main advantage of trading using opposite Monster Beverage and Devon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Devon Energy 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 Devon Energy will offset losses from the drop in Devon Energy'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 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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