Correlation Between Monster Beverage and United States
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and United States 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 United States 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 United States Steel, you can compare the effects of market volatilities on Monster Beverage and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and United States.
Diversification Opportunities for Monster Beverage and United States
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Monster and United is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of Monster Beverage i.e., Monster Beverage and United States go up and down completely randomly.
Pair Corralation between Monster Beverage and United States
Assuming the 90 days trading horizon Monster Beverage is expected to generate 5.4 times less return on investment than United States. But when comparing it to its historical volatility, Monster Beverage Corp is 4.34 times less risky than United States. It trades about 0.1 of its potential returns per unit of risk. United States Steel is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 78,206 in United States Steel on August 24, 2024 and sell it today you would earn a total of 6,574 from holding United States Steel or generate 8.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. United States Steel
Performance |
| Timeline |
| Monster Beverage Corp |
| United States Steel |
Monster Beverage and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and United States
The main advantage of trading using opposite Monster Beverage and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| Monster Beverage vs. The Select Sector | Monster Beverage vs. Promotora y Operadora | Monster Beverage vs. iShares Global Timber | Monster Beverage vs. SPDR Series Trust |
| United States vs. KB Home | United States vs. Martin Marietta Materials | United States vs. Southwest Airlines | United States vs. Monster Beverage Corp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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