Correlation Between Monster Beverage and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Southern Copper 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 Southern Copper 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 Southern Copper, you can compare the effects of market volatilities on Monster Beverage and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Southern Copper.
Diversification Opportunities for Monster Beverage and Southern Copper
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Southern is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Monster Beverage i.e., Monster Beverage and Southern Copper go up and down completely randomly.
Pair Corralation between Monster Beverage and Southern Copper
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.9 times more return on investment than Southern Copper. However, Monster Beverage Corp is 1.11 times less risky than Southern Copper. It trades about 0.19 of its potential returns per unit of risk. Southern Copper is currently generating about 0.05 per unit of risk. If you would invest 91,850 in Monster Beverage Corp on August 28, 2024 and sell it today you would earn a total of 19,015 from holding Monster Beverage Corp or generate 20.7% 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. Southern Copper
Performance |
| Timeline |
| Monster Beverage Corp |
| Southern Copper |
Monster Beverage and Southern Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Southern Copper
The main advantage of trading using opposite Monster Beverage and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.| Monster Beverage vs. Grupo Sports World | Monster Beverage vs. DXC Technology | Monster Beverage vs. Samsung Electronics Co | Monster Beverage vs. Verizon Communications |
| Southern Copper vs. Prudential Financial | Southern Copper vs. Verizon Communications | Southern Copper vs. Ross Stores | Southern Copper vs. McEwen Mining |
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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