Correlation Between Coca Cola and Australian Agricultural

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and Australian Agricultural 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 Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Australian Agricultural, you can compare the effects of market volatilities on Coca Cola and Australian Agricultural 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 Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Australian Agricultural.

Diversification Opportunities for Coca Cola and Australian Agricultural

CocaAustralianDiversified AwayCocaAustralianDiversified Away100%
0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Coca and Australian is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 The Coca Cola are associated (or correlated) with Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Coca Cola i.e., Coca Cola and Australian Agricultural go up and down completely randomly.

Pair Corralation between Coca Cola and Australian Agricultural

Assuming the 90 days trading horizon The Coca Cola is expected to under-perform the Australian Agricultural. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.38 times less risky than Australian Agricultural. The stock trades about -0.05 of its potential returns per unit of risk. The Australian Agricultural is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Australian Agricultural on October 26, 2024 and sell it today you would lose (1.00) from holding Australian Agricultural or give up 1.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

The Coca Cola  vs.  Australian Agricultural

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10-8-6-4-202
JavaScript chart by amCharts 3.21.15CCC3 AY5
       Timeline  
Coca Cola 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan5859606162
Australian Agricultural 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan0.80.810.820.830.840.850.860.87

Coca Cola and Australian Agricultural Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.8-1.37-0.94-0.51-0.08970.240.671.11.531.96 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15CCC3 AY5
       Returns  

Pair Trading with Coca Cola and Australian Agricultural

The main advantage of trading using opposite Coca Cola and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.
The idea behind The Coca Cola and Australian Agricultural 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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