Correlation Between Coca Cola and UmweltBank

Can any of the company-specific risk be diversified away by investing in both Coca Cola and UmweltBank 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 UmweltBank 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 UmweltBank AG, you can compare the effects of market volatilities on Coca Cola and UmweltBank 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 UmweltBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and UmweltBank.

Diversification Opportunities for Coca Cola and UmweltBank

-0.58

Correlation Coefficient

Coca Cola  UmweltBank

Excellent diversification

The 3 months correlation between Coca and UmweltBank is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and UmweltBank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UmweltBank AG 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 UmweltBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UmweltBank AG has no effect on the direction of Coca Cola i.e., Coca Cola and UmweltBank go up and down completely randomly.

Pair Corralation between Coca Cola and UmweltBank

Assuming the 90 days trading horizon The Coca Cola is expected to generate 0.34 times more return on investment than UmweltBank. However, The Coca Cola is 2.98 times less risky than UmweltBank. It trades about 0.05 of its potential returns per unit of risk. UmweltBank AG is currently generating about -0.03 per unit of risk. If you would invest  5,341  in The Coca Cola on October 9, 2024 and sell it today you would earn a total of  508.00  from holding The Coca Cola or generate 9.51% return on investment over 90 days.

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

The Coca Cola  vs.  UmweltBank AG

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. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

UmweltBank AG

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UmweltBank AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, UmweltBank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and UmweltBank

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

The idea behind The Coca Cola and UmweltBank AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..