Correlation Between LODESTAR MIN and Coca Cola

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

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

Diversification Opportunities for LODESTAR MIN and Coca Cola

-0.32

Correlation Coefficient

LODESTAR MIN  Coca Cola

Very good diversification

The 3 months correlation between LODESTAR and Coca is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding LODESTAR MIN and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and LODESTAR MIN 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 LODESTAR MIN are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of LODESTAR MIN i.e., LODESTAR MIN and Coca Cola go up and down completely randomly.

Pair Corralation between LODESTAR MIN and Coca Cola

Assuming the 90 days trading horizon LODESTAR MIN is expected to generate 54.47 times more return on investment than Coca Cola. However, LODESTAR MIN is 54.47 times more volatile than The Coca Cola. It trades about 0.04 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.03 per unit of risk. If you would invest  0.69  in LODESTAR MIN on October 5, 2024 and sell it today you would earn a total of  8.08  from holding LODESTAR MIN or generate 1171.01% return on investment over 90 days.

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

LODESTAR MIN  vs.  The Coca Cola

LODESTAR MIN

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days LODESTAR MIN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain forward-looking indicators, LODESTAR MIN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with LODESTAR MIN and Coca Cola

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

The idea behind LODESTAR MIN and The Coca Cola 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.