Correlation Between COCA A and Coca Cola
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
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
COCA A HBC vs. Coca Cola European Partners
Performance |
Timeline |
COCA A HBC |
Coca Cola European |
COCA A and Coca Cola Volatility Contrast
Predicted Return Density |
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.COCA A vs. PepsiCo | ||
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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