Correlation Between Monster Beverage and VIRG NATL

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

Diversification Opportunities for Monster Beverage and VIRG NATL

0.6

Correlation Coefficient

Monster Beverage  VIRG NATL

Poor diversification

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

Pair Corralation between Monster Beverage and VIRG NATL

Assuming the 90 days trading horizon Monster Beverage Corp is expected to under-perform the VIRG NATL. But the stock apears to be less risky and, when comparing its historical volatility, Monster Beverage Corp is 3.68 times less risky than VIRG NATL. The stock trades about -0.25 of its potential returns per unit of risk. The VIRG NATL BANKSH is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,868  in VIRG NATL BANKSH on September 28, 2024 and sell it today you would lose (148.00) from holding VIRG NATL BANKSH or give up 3.83% of portfolio value over 90 days.

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

Monster Beverage Corp  vs.  VIRG NATL BANKSH

Monster Beverage Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Monster Beverage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VIRG NATL BANKSH

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VIRG NATL BANKSH are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VIRG NATL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Monster Beverage and VIRG NATL

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

The idea behind Monster Beverage Corp and VIRG NATL BANKSH 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.