Correlation Between Monster Beverage and BKV

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

Diversification Opportunities for Monster Beverage and BKV

-0.42

Correlation Coefficient

Monster Beverage  BKV

Very good diversification

The 3 months correlation between Monster and BKV is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and BKV Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKV Corporation 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 BKV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKV Corporation has no effect on the direction of Monster Beverage i.e., Monster Beverage and BKV go up and down completely randomly.

Pair Corralation between Monster Beverage and BKV

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the BKV. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.4 times less risky than BKV. The stock trades about -0.1 of its potential returns per unit of risk. The BKV Corporation is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,805  in BKV Corporation on October 25, 2024 and sell it today you would earn a total of  840.00  from holding BKV Corporation or generate 46.54% return on investment over 90 days.

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

Monster Beverage Corp  vs.  BKV Corp.

Monster Beverage Corp

Risk-Adjusted Performance

0 of 100

Very 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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BKV Corporation

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, BKV showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and BKV

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

The idea behind Monster Beverage Corp and BKV Corporation 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.