Correlation Between Monster Beverage and Chevron Corp

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

Diversification Opportunities for Monster Beverage and Chevron Corp

0.79

Correlation Coefficient

Monster Beverage  Chevron Corp

Poor diversification

The 3 months correlation between Monster and Chevron is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Monster Beverage i.e., Monster Beverage and Chevron Corp go up and down completely randomly.

Pair Corralation between Monster Beverage and Chevron Corp

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.03 times less return on investment than Chevron Corp. In addition to that, Monster Beverage is 1.11 times more volatile than Chevron Corp. It trades about 0.06 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.06 per unit of volatility. If you would invest  258,269  in Chevron Corp on October 8, 2024 and sell it today you would earn a total of  47,413  from holding Chevron Corp or generate 18.36% return on investment over 90 days.

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

Monster Beverage Corp  vs.  Chevron Corp

Monster Beverage Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Monster Beverage showed solid returns over the last few months and may actually be approaching a breakup point.

Chevron Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Monster Beverage and Chevron Corp

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

The idea behind Monster Beverage Corp and Chevron 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.