Correlation Between Monster Beverage and JD
Can any of the company-specific risk be diversified away by investing in both Monster Beverage and JD 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 JD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monster Beverage and JD Inc, you can compare the effects of market volatilities on Monster Beverage and JD 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 JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monster Beverage and JD.
Diversification Opportunities for Monster Beverage and JD
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Monster and JD is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and JD Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc 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 are associated (or correlated) with JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc has no effect on the direction of Monster Beverage i.e., Monster Beverage and JD go up and down completely randomly.
Pair Corralation between Monster Beverage and JD
Assuming the 90 days trading horizon Monster Beverage is expected to generate 3.64 times less return on investment than JD. But when comparing it to its historical volatility, Monster Beverage is 2.47 times less risky than JD. It trades about 0.12 of its potential returns per unit of risk. JD Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2,392 in JD Inc on September 7, 2024 and sell it today you would earn a total of 1,249 from holding JD Inc or generate 52.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Monster Beverage vs. JD Inc
Performance |
Timeline |
Monster Beverage |
JD Inc |
Monster Beverage and JD Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Monster Beverage and JD
The main advantage of trading using opposite Monster Beverage and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monster Beverage position performs unexpectedly, JD 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 JD will offset losses from the drop in JD's long position.Monster Beverage vs. The Home Depot | Monster Beverage vs. Dell Technologies | Monster Beverage vs. Bio Techne | Monster Beverage vs. Uber Technologies |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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