Correlation Between Monster Beverage and Nike
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Nike 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 Nike 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 Nike Inc, you can compare the effects of market volatilities on Monster Beverage and Nike 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 Nike. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Nike.
Diversification Opportunities for Monster Beverage and Nike
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monster and Nike is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Nike Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nike Inc 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 Nike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nike Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and Nike go up and down completely randomly.
Pair Corralation between Monster Beverage and Nike
Given the investment horizon of 90 days Monster Beverage Corp is expected to generate 1.25 times more return on investment than Nike. However, Monster Beverage is 1.25 times more volatile than Nike Inc. It trades about 0.13 of its potential returns per unit of risk. Nike Inc is currently generating about 0.03 per unit of risk. If you would invest 5,230 in Monster Beverage Corp on September 2, 2024 and sell it today you would earn a total of 283.00 from holding Monster Beverage Corp or generate 5.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Nike Inc
Performance |
| Timeline |
| Monster Beverage Corp |
| Nike Inc |
Monster Beverage and Nike Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Nike
The main advantage of trading using opposite Monster Beverage and Nike positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Nike 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 Nike will offset losses from the drop in Nike'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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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