Correlation Between Gen Digital and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Gen Digital 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 Gen Digital and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gen Digital and Monster Beverage, you can compare the effects of market volatilities on Gen Digital 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 Gen Digital with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gen Digital and Monster Beverage.
Diversification Opportunities for Gen Digital and Monster Beverage
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gen and Monster is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage and Gen Digital 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 Gen Digital 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 has no effect on the direction of Gen Digital i.e., Gen Digital and Monster Beverage go up and down completely randomly.
Pair Corralation between Gen Digital and Monster Beverage
Assuming the 90 days trading horizon Gen Digital is expected to generate 0.53 times more return on investment than Monster Beverage. However, Gen Digital is 1.9 times less risky than Monster Beverage. It trades about -0.22 of its potential returns per unit of risk. Monster Beverage is currently generating about -0.25 per unit of risk. If you would invest 17,893 in Gen Digital on November 6, 2024 and sell it today you would lose (893.00) from holding Gen Digital or give up 4.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Gen Digital vs. Monster Beverage
Performance |
| Timeline |
| Gen Digital |
| Monster Beverage |
Gen Digital and Monster Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gen Digital and Monster Beverage
The main advantage of trading using opposite Gen Digital and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gen Digital 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.| Gen Digital vs. Martin Marietta Materials, | Gen Digital vs. Marfrig Global Foods | Gen Digital vs. Applied Materials, | Gen Digital vs. New Oriental Education |
| Monster Beverage vs. The Coca Cola | Monster Beverage vs. Ameriprise Financial | Monster Beverage vs. Sony Group |
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.
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