Correlation Between Monster Beverage and Lockheed Martin
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin, you can compare the effects of market volatilities on Monster Beverage and Lockheed Martin 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 Lockheed Martin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Lockheed Martin.
Diversification Opportunities for Monster Beverage and Lockheed Martin
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Monster and Lockheed is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Monster Beverage i.e., Monster Beverage and Lockheed Martin go up and down completely randomly.
Pair Corralation between Monster Beverage and Lockheed Martin
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.58 times more return on investment than Lockheed Martin. However, Monster Beverage Corp is 1.71 times less risky than Lockheed Martin. It trades about 0.34 of its potential returns per unit of risk. Lockheed Martin is currently generating about 0.02 per unit of risk. If you would invest 106,294 in Monster Beverage Corp on September 4, 2024 and sell it today you would earn a total of 7,206 from holding Monster Beverage Corp or generate 6.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Lockheed Martin
Performance |
| Timeline |
| Monster Beverage Corp |
| Lockheed Martin |
Monster Beverage and Lockheed Martin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Lockheed Martin
The main advantage of trading using opposite Monster Beverage and Lockheed Martin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Lockheed Martin 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 Lockheed Martin will offset losses from the drop in Lockheed Martin's long position.| Monster Beverage vs. The Select Sector | Monster Beverage vs. Promotora y Operadora | Monster Beverage vs. SPDR Series Trust | Monster Beverage vs. Vanguard World |
| Lockheed Martin vs. Martin Marietta Materials | Lockheed Martin vs. Ameriprise Financial | Lockheed Martin vs. FibraHotel | Lockheed Martin vs. Cognizant Technology Solutions |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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