Correlation Between Monster Beverage and National Beverage
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and National Beverage 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 National Beverage 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 National Beverage Corp, you can compare the effects of market volatilities on Monster Beverage and National Beverage 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 National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and National Beverage.
Diversification Opportunities for Monster Beverage and National Beverage
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and National is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp 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 National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and National Beverage go up and down completely randomly.
Pair Corralation between Monster Beverage and National Beverage
Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the National Beverage. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.14 times less risky than National Beverage. The stock trades about -0.02 of its potential returns per unit of risk. The National Beverage Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 4,913 in National Beverage Corp on August 27, 2024 and sell it today you would lose (126.00) from holding National Beverage Corp or give up 2.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. National Beverage Corp
Performance |
| Timeline |
| Monster Beverage Corp |
| National Beverage Corp |
Monster Beverage and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and National Beverage
The main advantage of trading using opposite Monster Beverage and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| Monster Beverage vs. Vita Coco | Monster Beverage vs. PepsiCo | Monster Beverage vs. The Coca Cola | Monster Beverage vs. Coca Cola Femsa SAB |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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