Correlation Between Monster Beverage and Arca Continental
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Arca Continental 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 Arca Continental 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 Arca Continental SAB, you can compare the effects of market volatilities on Monster Beverage and Arca Continental 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 Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Arca Continental.
Diversification Opportunities for Monster Beverage and Arca Continental
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Monster and Arca is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Monster Beverage i.e., Monster Beverage and Arca Continental go up and down completely randomly.
Pair Corralation between Monster Beverage and Arca Continental
Given the investment horizon of 90 days Monster Beverage is expected to generate 2.5 times less return on investment than Arca Continental. But when comparing it to its historical volatility, Monster Beverage Corp is 1.59 times less risky than Arca Continental. It trades about 0.04 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 607.00 in Arca Continental SAB on January 19, 2024 and sell it today you would earn a total of 366.00 from holding Arca Continental SAB or generate 60.3% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 82.42% |
Values | Daily Returns |
Monster Beverage Corp vs. Arca Continental SAB
Performance |
Timeline |
Monster Beverage Corp |
Arca Continental SAB |
Monster Beverage and Arca Continental Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Monster Beverage and Arca Continental
The main advantage of trading using opposite Monster Beverage and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental's long position.Monster Beverage vs. Keurig Dr Pepper | Monster Beverage vs. Embotelladora Andina SA | Monster Beverage vs. Embotelladora Andina SA | Monster Beverage vs. Signet International Holdings |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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