Correlation Between VIRG NATL and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both VIRG NATL 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 VIRG NATL and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VIRG NATL BANKSH and Monster Beverage Corp, you can compare the effects of market volatilities on VIRG NATL 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 VIRG NATL with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of VIRG NATL and Monster Beverage.

Diversification Opportunities for VIRG NATL and Monster Beverage

0.49

Correlation Coefficient

VIRG NATL  Monster Beverage

Very weak diversification

The 3 months correlation between VIRG and Monster is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH 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 VIRG NATL 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 VIRG NATL BANKSH 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 VIRG NATL i.e., VIRG NATL and Monster Beverage go up and down completely randomly.

Pair Corralation between VIRG NATL and Monster Beverage

Assuming the 90 days horizon VIRG NATL BANKSH is expected to under-perform the Monster Beverage. In addition to that, VIRG NATL is 2.95 times more volatile than Monster Beverage Corp. It trades about -0.34 of its total potential returns per unit of risk. Monster Beverage Corp is currently generating about -0.08 per unit of volatility. If you would invest  4,972  in Monster Beverage Corp on October 16, 2024 and sell it today you would lose (73.00) from holding Monster Beverage Corp or give up 1.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

VIRG NATL BANKSH  vs.  Monster Beverage Corp

VIRG NATL BANKSH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIRG NATL BANKSH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VIRG NATL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Monster Beverage Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VIRG NATL and Monster Beverage

The main advantage of trading using opposite VIRG NATL and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIRG NATL 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 VIRG NATL BANKSH 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.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.