Correlation Between Monster Beverage and Chesapeake Energy

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

Diversification Opportunities for Monster Beverage and Chesapeake Energy

-0.67

Correlation Coefficient

Monster Beverage  Chesapeake Energy

Excellent diversification

The 3 months correlation between Monster and Chesapeake is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage Corp and Chesapeake Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Energy 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 Chesapeake Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Energy has no effect on the direction of Monster Beverage i.e., Monster Beverage and Chesapeake Energy go up and down completely randomly.

Pair Corralation between Monster Beverage and Chesapeake Energy

Given the investment horizon of 90 days Monster Beverage Corp is expected to under-perform the Chesapeake Energy. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 1.42 times less risky than Chesapeake Energy. The stock trades about 0.0 of its potential returns per unit of risk. The Chesapeake Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6,553  in Chesapeake Energy on September 14, 2024 and sell it today you would lose (149.00) from holding Chesapeake Energy or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.04%
Values	Daily Returns

Monster Beverage Corp  vs.  Chesapeake Energy

Monster Beverage Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Chesapeake Energy

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Chesapeake Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly conflicting technical and fundamental indicators, Chesapeake Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Chesapeake Energy

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

The idea behind Monster Beverage Corp and Chesapeake Energy 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.