Correlation Between Monster Beverage and American Eagle
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and American Eagle 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 American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on Monster Beverage and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and American Eagle.
Diversification Opportunities for Monster Beverage and American Eagle
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Monster and American is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Monster Beverage i.e., Monster Beverage and American Eagle go up and down completely randomly.
Pair Corralation between Monster Beverage and American Eagle
Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.68 times less return on investment than American Eagle. But when comparing it to its historical volatility, Monster Beverage Corp is 1.93 times less risky than American Eagle. It trades about 0.01 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,424 in American Eagle Outfitters on August 26, 2024 and sell it today you would earn a total of 266.00 from holding American Eagle Outfitters or generate 18.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. American Eagle Outfitters
Performance |
| Timeline |
| Monster Beverage Corp |
| American Eagle Outfitters |
Monster Beverage and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and American Eagle
The main advantage of trading using opposite Monster Beverage and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc |
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.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |