Correlation Between Monster Beverage and Banco Bilbao

Can any of the company-specific risk be diversified away by investing in both Monster Beverage and Banco Bilbao 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 Banco Bilbao 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 Banco Bilbao Vizcaya, you can compare the effects of market volatilities on Monster Beverage and Banco Bilbao 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 Banco Bilbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and Banco Bilbao.

Diversification Opportunities for Monster Beverage and Banco Bilbao

-0.6

Correlation Coefficient

Monster Beverage  Banco Bilbao

Excellent diversification

The 3 months correlation between Monster and Banco is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Monster Beverage i.e., Monster Beverage and Banco Bilbao go up and down completely randomly.

Pair Corralation between Monster Beverage and Banco Bilbao

Assuming the 90 days trading horizon Monster Beverage is expected to generate 6.47 times less return on investment than Banco Bilbao. But when comparing it to its historical volatility, Monster Beverage Corp is 1.2 times less risky than Banco Bilbao. It trades about 0.01 of its potential returns per unit of risk. Banco Bilbao Vizcaya is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,659  in Banco Bilbao Vizcaya on September 24, 2024 and sell it today you would earn a total of  8,841  from holding Banco Bilbao Vizcaya or generate 82.94% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Banco Bilbao Vizcaya

Monster Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco Bilbao Vizcaya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Bilbao Vizcaya has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Banco Bilbao is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Monster Beverage and Banco Bilbao

The main advantage of trading using opposite Monster Beverage and Banco Bilbao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, Banco Bilbao 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 Banco Bilbao will offset losses from the drop in Banco Bilbao's long position.

The idea behind Monster Beverage Corp and Banco Bilbao Vizcaya 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.