Correlation Between Coca Cola and Markel Corp

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

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

Diversification Opportunities for Coca Cola and Markel Corp

-0.79

Correlation Coefficient

Coca Cola  Markel Corp

Pay attention - limited upside

The 3 months correlation between Coca and Markel is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Co and Markel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel Corp and Coca Cola 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 Coca Cola Co are associated (or correlated) with Markel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel Corp has no effect on the direction of Coca Cola i.e., Coca Cola and Markel Corp go up and down completely randomly.

Pair Corralation between Coca Cola and Markel Corp

Assuming the 90 days trading horizon Coca Cola is expected to generate 2.93 times less return on investment than Markel Corp. But when comparing it to its historical volatility, Coca Cola Co is 1.55 times less risky than Markel Corp. It trades about 0.04 of its potential returns per unit of risk. Markel Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  140,415  in Markel Corp on October 7, 2024 and sell it today you would earn a total of  31,395  from holding Markel Corp or generate 22.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.81%
Values	Daily Returns

Coca Cola Co  vs.  Markel Corp

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Markel Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Markel Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Coca Cola and Markel Corp

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

The idea behind Coca Cola Co and Markel 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.