Correlation Between Monster Beverage and Peloton Interactive
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Peloton Interactive 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 Peloton Interactive 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 Peloton Interactive, you can compare the effects of market volatilities on Monster Beverage and Peloton Interactive 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 Peloton Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Peloton Interactive.
Diversification Opportunities for Monster Beverage and Peloton Interactive
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Monster and Peloton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive 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 Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of Monster Beverage i.e., Monster Beverage and Peloton Interactive go up and down completely randomly.
Pair Corralation between Monster Beverage and Peloton Interactive
Assuming the 90 days trading horizon Monster Beverage is expected to generate 22.24 times less return on investment than Peloton Interactive. But when comparing it to its historical volatility, Monster Beverage Corp is 3.96 times less risky than Peloton Interactive. It trades about 0.01 of its potential returns per unit of risk. Peloton Interactive is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 841.00 in Peloton Interactive on September 12, 2024 and sell it today you would earn a total of 91.00 from holding Peloton Interactive or generate 10.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. Peloton Interactive
Performance |
| Timeline |
| Monster Beverage Corp |
| Peloton Interactive |
Monster Beverage and Peloton Interactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Peloton Interactive
The main advantage of trading using opposite Monster Beverage and Peloton Interactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Peloton Interactive 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 Peloton Interactive will offset losses from the drop in Peloton Interactive's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
| Peloton Interactive vs. INSURANCE AUST GRP | Peloton Interactive vs. Monster Beverage Corp | Peloton Interactive vs. SBI Insurance Group | Peloton Interactive vs. ScanSource |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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