Correlation Between Walmart and Monster Beverage

Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Monster Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Monster Beverage Corp, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Monster Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Monster Beverage.

Diversification Opportunities for Walmart and Monster Beverage

0.69

Correlation Coefficient

Walmart  Monster Beverage

Poor diversification

The 3 months correlation between Walmart and Monster is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Walmart 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 Walmart 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 Walmart 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 Walmart i.e., Walmart and Monster Beverage go up and down completely randomly.

Pair Corralation between Walmart and Monster Beverage

Assuming the 90 days trading horizon Walmart is expected to generate 0.79 times more return on investment than Monster Beverage. However, Walmart is 1.27 times less risky than Monster Beverage. It trades about 0.17 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  96,500  in Walmart on September 24, 2024 and sell it today you would earn a total of  88,500  from holding Walmart or generate 91.71% return on investment over 90 days.

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

Walmart  vs.  Monster Beverage Corp

Walmart

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Monster Beverage Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Monster Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Walmart and Monster Beverage

The main advantage of trading using opposite Walmart and Monster Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.

The idea behind Walmart and Monster Beverage 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.