Correlation Between Monster Beverage and CSL
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and CSL 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 CSL 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 CSL Limited, you can compare the effects of market volatilities on Monster Beverage and CSL 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 CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and CSL.
Diversification Opportunities for Monster Beverage and CSL
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Monster and CSL is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and CSL Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL Limited 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 CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL Limited has no effect on the direction of Monster Beverage i.e., Monster Beverage and CSL go up and down completely randomly.
Pair Corralation between Monster Beverage and CSL
Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.54 times less return on investment than CSL. In addition to that, Monster Beverage is 1.23 times more volatile than CSL Limited. It trades about 0.02 of its total potential returns per unit of risk. CSL Limited is currently generating about 0.03 per unit of volatility. If you would invest 15,399 in CSL Limited on August 25, 2024 and sell it today you would earn a total of 1,397 from holding CSL Limited or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monster Beverage Corp vs. CSL Limited
Performance |
| Timeline |
| Monster Beverage Corp |
| CSL Limited |
Monster Beverage and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and CSL
The main advantage of trading using opposite Monster Beverage and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
| CSL vs. United Breweries Co | CSL vs. Monster Beverage Corp | CSL vs. Columbia Sportswear | CSL vs. COLUMBIA SPORTSWEAR |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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