Correlation Between Monster Beverage and Aqua America
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Aqua America 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 Aqua America 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 Aqua America, you can compare the effects of market volatilities on Monster Beverage and Aqua America 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 Aqua America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Aqua America.
Diversification Opportunities for Monster Beverage and Aqua America
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Aqua is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Aqua America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqua America 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 Aqua America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqua America has no effect on the direction of Monster Beverage i.e., Monster Beverage and Aqua America go up and down completely randomly.
Pair Corralation between Monster Beverage and Aqua America
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.82 times more return on investment than Aqua America. However, Monster Beverage Corp is 1.22 times less risky than Aqua America. It trades about -0.02 of its potential returns per unit of risk. Aqua America is currently generating about -0.26 per unit of risk. If you would invest 5,042 in Monster Beverage Corp on October 9, 2024 and sell it today you would lose (17.00) from holding Monster Beverage Corp or give up 0.34% 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. Aqua America
Performance |
| Timeline |
| Monster Beverage Corp |
| Aqua America |
Monster Beverage and Aqua America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Aqua America
The main advantage of trading using opposite Monster Beverage and Aqua America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Aqua America 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 Aqua America will offset losses from the drop in Aqua America's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
| Aqua America vs. Granite Construction | Aqua America vs. AGRICULTBK HADR25 YC | Aqua America vs. Tianjin Capital Environmental | Aqua America vs. Federal Agricultural Mortgage |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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