Correlation Between Monster Beverage and LG Display
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and LG Display 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 LG Display 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 LG Display Co, you can compare the effects of market volatilities on Monster Beverage and LG Display 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 LG Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and LG Display.
Diversification Opportunities for Monster Beverage and LG Display
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Monster and LGA is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and LG Display Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Display 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 LG Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Display has no effect on the direction of Monster Beverage i.e., Monster Beverage and LG Display go up and down completely randomly.
Pair Corralation between Monster Beverage and LG Display
Assuming the 90 days trading horizon Monster Beverage Corp is expected to generate 0.89 times more return on investment than LG Display. However, Monster Beverage Corp is 1.12 times less risky than LG Display. It trades about 0.19 of its potential returns per unit of risk. LG Display Co is currently generating about -0.07 per unit of risk. If you would invest 4,235 in Monster Beverage Corp on August 26, 2024 and sell it today you would earn a total of 949.00 from holding Monster Beverage Corp or generate 22.41% 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. LG Display Co
Performance |
| Timeline |
| Monster Beverage Corp |
| LG Display |
Monster Beverage and LG Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and LG Display
The main advantage of trading using opposite Monster Beverage and LG Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, LG Display 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 LG Display will offset losses from the drop in LG Display's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
| LG Display vs. Amazon Inc | LG Display vs. Microsoft | LG Display vs. Tesla Inc | LG Display vs. Alphabet Class A |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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