Correlation Between Monster Beverage and PPG Industries
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and PPG Industries 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 PPG Industries 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 PPG Industries, you can compare the effects of market volatilities on Monster Beverage and PPG Industries 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 PPG Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and PPG Industries.
Diversification Opportunities for Monster Beverage and PPG Industries
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and PPG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and PPG Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPG Industries 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 PPG Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPG Industries has no effect on the direction of Monster Beverage i.e., Monster Beverage and PPG Industries go up and down completely randomly.
Pair Corralation between Monster Beverage and PPG Industries
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 2.08 times more return on investment than PPG Industries. However, Monster Beverage is 2.08 times more volatile than PPG Industries. It trades about 0.05 of its potential returns per unit of risk. PPG Industries is currently generating about 0.04 per unit of risk. If you would invest 92,600 in Monster Beverage Corp on September 4, 2024 and sell it today you would earn a total of 20,900 from holding Monster Beverage Corp or generate 22.57% 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. PPG Industries
Performance |
| Timeline |
| Monster Beverage Corp |
| PPG Industries |
Monster Beverage and PPG Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and PPG Industries
The main advantage of trading using opposite Monster Beverage and PPG Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, PPG Industries 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 PPG Industries will offset losses from the drop in PPG Industries' 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 |
| PPG Industries vs. Cognizant Technology Solutions | PPG Industries vs. Samsung Electronics Co | PPG Industries vs. First Republic Bank | PPG Industries vs. New Oriental Education |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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