Correlation Between Coca Cola and Berkeley Energia

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

By analyzing existing cross correlation between Coca Cola European Partners and Berkeley Energia Limited, you can compare the effects of market volatilities on Coca Cola and Berkeley Energia 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 Berkeley Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Berkeley Energia.

Diversification Opportunities for Coca Cola and Berkeley Energia

0.17

Correlation Coefficient

Coca Cola  Berkeley Energia

Average diversification

The 3 months correlation between Coca and Berkeley is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Berkeley Energia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energia 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 European Partners are associated (or correlated) with Berkeley Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energia has no effect on the direction of Coca Cola i.e., Coca Cola and Berkeley Energia go up and down completely randomly.

Pair Corralation between Coca Cola and Berkeley Energia

Assuming the 90 days trading horizon Coca Cola European Partners is expected to generate 0.46 times more return on investment than Berkeley Energia. However, Coca Cola European Partners is 2.2 times less risky than Berkeley Energia. It trades about 0.07 of its potential returns per unit of risk. Berkeley Energia Limited is currently generating about -0.02 per unit of risk. If you would invest  6,778  in Coca Cola European Partners on September 14, 2024 and sell it today you would earn a total of  722.00  from holding Coca Cola European Partners or generate 10.65% return on investment over 90 days.

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

Coca Cola European Partners  vs.  Berkeley Energia Limited

Coca Cola European

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Coca Cola is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Berkeley Energia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energia Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Berkeley Energia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and Berkeley Energia

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

The idea behind Coca Cola European Partners and Berkeley Energia Limited 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.