Correlation Between Monster Beverage and Mastercard Incorporated
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Mastercard Incorporated 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 Mastercard Incorporated 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 Mastercard Incorporated, you can compare the effects of market volatilities on Monster Beverage and Mastercard Incorporated 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 Mastercard Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Mastercard Incorporated.
Diversification Opportunities for Monster Beverage and Mastercard Incorporated
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monster and Mastercard is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Monster Beverage i.e., Monster Beverage and Mastercard Incorporated go up and down completely randomly.
Pair Corralation between Monster Beverage and Mastercard Incorporated
Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.23 times less return on investment than Mastercard Incorporated. But when comparing it to its historical volatility, Monster Beverage Corp is 1.58 times less risky than Mastercard Incorporated. It trades about 0.25 of its potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 1,017,890 in Mastercard Incorporated on August 29, 2024 and sell it today you would earn a total of 74,796 from holding Mastercard Incorporated or generate 7.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Mastercard Incorporated
Performance |
| Timeline |
| Monster Beverage Corp |
| Mastercard Incorporated |
Monster Beverage and Mastercard Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Mastercard Incorporated
The main advantage of trading using opposite Monster Beverage and Mastercard Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Mastercard Incorporated 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 Mastercard Incorporated will offset losses from the drop in Mastercard Incorporated's long position.| Monster Beverage vs. The Select Sector | Monster Beverage vs. SPDR Series Trust | Monster Beverage vs. FibroGen | Monster Beverage vs. iShares Trust |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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