Correlation Between Monster Beverage and Sea
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Sea 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 Sea 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 Sea, you can compare the effects of market volatilities on Monster Beverage and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Sea.
Diversification Opportunities for Monster Beverage and Sea
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Sea is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Monster Beverage i.e., Monster Beverage and Sea go up and down completely randomly.
Pair Corralation between Monster Beverage and Sea
Given the investment horizon of 90 days Monster Beverage is expected to generate 4.04 times less return on investment than Sea. But when comparing it to its historical volatility, Monster Beverage Corp is 1.53 times less risky than Sea. It trades about 0.12 of its potential returns per unit of risk. Sea is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 9,405 in Sea on September 1, 2024 and sell it today you would earn a total of 1,975 from holding Sea or generate 21.0% 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. Sea
Performance |
| Timeline |
| Monster Beverage Corp |
| Sea |
Monster Beverage and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Sea
The main advantage of trading using opposite Monster Beverage and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| Monster Beverage vs. Coca Cola Femsa SAB | Monster Beverage vs. National Beverage Corp | Monster Beverage vs. Embotelladora Andina SA |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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