Correlation Between Valero Energy and Monster Beverage
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Monster Beverage 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 Valero Energy and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Monster Beverage Corp, you can compare the effects of market volatilities on Valero Energy and Monster Beverage 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 Valero Energy with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Monster Beverage.
Diversification Opportunities for Valero Energy and Monster Beverage
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valero and Monster is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Monster Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage Corp and Valero Energy 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 Valero Energy are associated (or correlated) with Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage Corp has no effect on the direction of Valero Energy i.e., Valero Energy and Monster Beverage go up and down completely randomly.
Pair Corralation between Valero Energy and Monster Beverage
Assuming the 90 days trading horizon Valero Energy is expected to generate 1.1 times more return on investment than Monster Beverage. However, Valero Energy is 1.1 times more volatile than Monster Beverage Corp. It trades about 0.03 of its potential returns per unit of risk. Monster Beverage Corp is currently generating about 0.03 per unit of risk. If you would invest 215,380 in Valero Energy on September 24, 2024 and sell it today you would earn a total of 26,637 from holding Valero Energy or generate 12.37% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.65% |
Values | Daily Returns |
Valero Energy vs. Monster Beverage Corp
Performance |
Timeline |
Valero Energy |
Monster Beverage Corp |
Valero Energy and Monster Beverage Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Valero Energy and Monster Beverage
The main advantage of trading using opposite Valero Energy and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Monster Beverage 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 Monster Beverage will offset losses from the drop in Monster Beverage's long position.Valero Energy vs. Monster Beverage Corp | Valero Energy vs. Amazon Inc | Valero Energy vs. Emerson Electric Co | Valero Energy vs. Tesla Inc |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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