Correlation Between Monster Beverage and Walmart

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

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

Diversification Opportunities for Monster Beverage and Walmart

0.86

Correlation Coefficient

Monster Beverage  Walmart

Very poor diversification

The 3 months correlation between Monster and Walmart is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Monster Beverage and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Monster Beverage i.e., Monster Beverage and Walmart go up and down completely randomly.

Pair Corralation between Monster Beverage and Walmart

Assuming the 90 days trading horizon Monster Beverage is expected to generate 1.9 times less return on investment than Walmart. In addition to that, Monster Beverage is 1.11 times more volatile than Walmart. It trades about 0.13 of its total potential returns per unit of risk. Walmart is currently generating about 0.27 per unit of volatility. If you would invest  2,793  in Walmart on September 12, 2024 and sell it today you would earn a total of  804.00  from holding Walmart or generate 28.79% return on investment over 90 days.

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

Monster Beverage  vs.  Walmart

Monster Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Monster Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Walmart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monster Beverage and Walmart

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

The idea behind Monster Beverage and Walmart 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.