Correlation Between Monster Beverage and Ross Stores
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Ross Stores 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 Ross Stores 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 Ross Stores, you can compare the effects of market volatilities on Monster Beverage and Ross Stores 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 Ross Stores. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Ross Stores.
Diversification Opportunities for Monster Beverage and Ross Stores
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Ross is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Monster Beverage i.e., Monster Beverage and Ross Stores go up and down completely randomly.
Pair Corralation between Monster Beverage and Ross Stores
Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.99 times less return on investment than Ross Stores. But when comparing it to its historical volatility, Monster Beverage Corp is 2.57 times less risky than Ross Stores. It trades about 0.29 of its potential returns per unit of risk. Ross Stores is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 286,000 in Ross Stores on August 31, 2024 and sell it today you would earn a total of 26,485 from holding Ross Stores or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 38.1% |
| Values | Daily Returns |
Monster Beverage Corp vs. Ross Stores
Performance |
| Timeline |
| Monster Beverage Corp |
| Ross Stores |
Monster Beverage and Ross Stores Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Ross Stores
The main advantage of trading using opposite Monster Beverage and Ross Stores positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Ross Stores 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 Ross Stores will offset losses from the drop in Ross Stores' long position.| Monster Beverage vs. The Select Sector | Monster Beverage vs. Promotora y Operadora | Monster Beverage vs. SPDR Series Trust | Monster Beverage vs. iShares Trust |
| Ross Stores vs. KB Home | Ross Stores vs. Grupo Sports World | Ross Stores vs. The Bank of | Ross Stores 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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