Correlation Between Biogen and Coca Cola

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

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

Diversification Opportunities for Biogen and Coca Cola

0.73

Correlation Coefficient

Biogen  Coca Cola

Poor diversification

The 3 months correlation between Biogen and Coca is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Biogen Inc and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA and Biogen 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 Biogen Inc 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 FEMSA has no effect on the direction of Biogen i.e., Biogen and Coca Cola go up and down completely randomly.

Pair Corralation between Biogen and Coca Cola

Assuming the 90 days trading horizon Biogen Inc is expected to under-perform the Coca Cola. But the stock apears to be less risky and, when comparing its historical volatility, Biogen Inc is 1.35 times less risky than Coca Cola. The stock trades about -0.26 of its potential returns per unit of risk. The Coca Cola FEMSA SAB is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  16,114  in Coca Cola FEMSA SAB on September 24, 2024 and sell it today you would lose (173.00) from holding Coca Cola FEMSA SAB or give up 1.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Biogen Inc  vs.  Coca Cola FEMSA SAB

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Biogen and Coca Cola

The main advantage of trading using opposite Biogen and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biogen 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 Biogen Inc and Coca Cola FEMSA SAB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.