Correlation Between Nasdaq and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Nasdaq and Monster Beverage 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 Nasdaq and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Monster Beverage Corp, you can compare the effects of market volatilities on Nasdaq and Monster Beverage 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 Nasdaq with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Monster Beverage.
Diversification Opportunities for Nasdaq and Monster Beverage
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nasdaq and Monster is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Nasdaq i.e., Nasdaq and Monster Beverage go up and down completely randomly.
Pair Corralation between Nasdaq and Monster Beverage
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.61 times more return on investment than Monster Beverage. However, Nasdaq Inc is 1.65 times less risky than Monster Beverage. It trades about 0.3 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.08 per unit of risk. If you would invest 7,301 in Nasdaq Inc on August 30, 2024 and sell it today you would earn a total of 1,004 from holding Nasdaq Inc or generate 13.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. Monster Beverage Corp
Performance |
| Timeline |
| Nasdaq Inc |
| Monster Beverage Corp |
Nasdaq and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Monster Beverage
The main advantage of trading using opposite Nasdaq and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq position performs unexpectedly, Monster Beverage 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 Monster Beverage will offset losses from the drop in Monster Beverage's long position.The idea behind Nasdaq Inc and Monster Beverage Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Monster Beverage vs. Coca Cola Consolidated | Monster Beverage vs. Keurig Dr Pepper | Monster Beverage vs. PepsiCo | Monster Beverage vs. Coca Cola Femsa SAB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |