Correlation Between Monster Beverage and American Airlines
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Monster Beverage and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and American Airlines.
Diversification Opportunities for Monster Beverage and American Airlines
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monster and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Monster Beverage i.e., Monster Beverage and American Airlines go up and down completely randomly.
Pair Corralation between Monster Beverage and American Airlines
Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.62 times less risky than American Airlines. The stock trades about -0.01 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,623 in American Airlines Group on August 25, 2024 and sell it today you would lose (185.00) from holding American Airlines Group or give up 11.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. American Airlines Group
Performance |
| Timeline |
| Monster Beverage Corp |
| American Airlines |
Monster Beverage and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and American Airlines
The main advantage of trading using opposite Monster Beverage and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Monster Beverage vs. Vita Coco | Monster Beverage vs. PepsiCo | Monster Beverage vs. The Coca Cola | Monster Beverage vs. Coca Cola Femsa SAB |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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