Correlation Between Monster Beverage and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Martin Marietta 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 Martin Marietta 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 Martin Marietta Materials, you can compare the effects of market volatilities on Monster Beverage and Martin Marietta 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 Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Martin Marietta.
Diversification Opportunities for Monster Beverage and Martin Marietta
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Monster and Martin is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials 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 Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Monster Beverage i.e., Monster Beverage and Martin Marietta go up and down completely randomly.
Pair Corralation between Monster Beverage and Martin Marietta
Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the Martin Marietta. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.05 times less risky than Martin Marietta. The stock trades about -0.29 of its potential returns per unit of risk. The Martin Marietta Materials is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest 56,161 in Martin Marietta Materials on October 28, 2024 and sell it today you would lose (3,821) from holding Martin Marietta Materials or give up 6.8% 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. Martin Marietta Materials
Performance |
| Timeline |
| Monster Beverage Corp |
| Martin Marietta Materials |
Monster Beverage and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monster Beverage and Martin Marietta
The main advantage of trading using opposite Monster Beverage and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Martin Marietta 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 Martin Marietta will offset losses from the drop in Martin Marietta's long position.| Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc | Monster Beverage vs. Apple Inc |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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