Correlation Between COCA A and Coca Cola

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

Diversification Opportunities for COCA A and Coca Cola

COCACocaDiversified AwayCOCACocaDiversified Away100%
0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between COCA and Coca is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding COCA A HBC and Coca Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola European and COCA A 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 A HBC 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 European has no effect on the direction of COCA A i.e., COCA A and Coca Cola go up and down completely randomly.

Pair Corralation between COCA A and Coca Cola

Assuming the 90 days trading horizon COCA A HBC is expected to generate 0.92 times more return on investment than Coca Cola. However, COCA A HBC is 1.09 times less risky than Coca Cola. It trades about 0.16 of its potential returns per unit of risk. Coca Cola European Partners is currently generating about 0.09 per unit of risk. If you would invest  3,260  in COCA A HBC on November 19, 2024 and sell it today you would earn a total of  540.00  from holding COCA A HBC or generate 16.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

COCA A HBC  vs.  Coca Cola European Partners

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15CCKC CK0
       Timeline  
COCA A HBC 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in COCA A HBC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, COCA A reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb32333435363738
Coca Cola European 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb717273747576777879

COCA A and Coca Cola Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.16-3.86-2.57-1.270.02291.352.734.15.47 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15CCKC CK0
       Returns  

Pair Trading with COCA A and Coca Cola

The main advantage of trading using opposite COCA A and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COCA A 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 COCA A HBC and Coca Cola European Partners 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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