Correlation Between Coca Cola and Pharma Mar

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

Diversification Opportunities for Coca Cola and Pharma Mar

0.82

Correlation Coefficient

Coca Cola  Pharma Mar

Very poor diversification

The 3 months correlation between Coca and Pharma is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Pharma Mar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharma Mar SA 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 Pharma Mar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharma Mar SA has no effect on the direction of Coca Cola i.e., Coca Cola and Pharma Mar go up and down completely randomly.

Pair Corralation between Coca Cola and Pharma Mar

Assuming the 90 days trading horizon Coca Cola European Partners is expected to generate 0.47 times more return on investment than Pharma Mar. However, Coca Cola European Partners is 2.14 times less risky than Pharma Mar. It trades about 0.13 of its potential returns per unit of risk. Pharma Mar SA is currently generating about 0.06 per unit of risk. If you would invest  7,230  in Coca Cola European Partners on December 29, 2024 and sell it today you would earn a total of  780.00  from holding Coca Cola European Partners or generate 10.79% return on investment over 90 days.

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

Coca Cola European Partners  vs.  Pharma Mar SA

Coca Cola European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pharma Mar SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pharma Mar SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Pharma Mar may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Coca Cola and Pharma Mar

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

The idea behind Coca Cola European Partners and Pharma Mar SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.