Correlation Between Capital Metals and Coca Cola

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

By analyzing existing cross correlation between Capital Metals PLC and Coca Cola Co, you can compare the effects of market volatilities on Capital Metals 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 Capital Metals with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Metals and Coca Cola.

Diversification Opportunities for Capital Metals and Coca Cola

0.59

Correlation Coefficient

Capital Metals  Coca Cola

Very weak diversification

The 3 months correlation between Capital and Coca is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Coca Cola Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Capital Metals 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 Capital Metals PLC 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 has no effect on the direction of Capital Metals i.e., Capital Metals and Coca Cola go up and down completely randomly.

Pair Corralation between Capital Metals and Coca Cola

Assuming the 90 days trading horizon Capital Metals PLC is expected to under-perform the Coca Cola. In addition to that, Capital Metals is 2.5 times more volatile than Coca Cola Co. It trades about -0.34 of its total potential returns per unit of risk. Coca Cola Co is currently generating about -0.15 per unit of volatility. If you would invest  6,245  in Coca Cola Co on October 9, 2024 and sell it today you would lose (120.00) from holding Coca Cola Co or give up 1.92% of portfolio value over 90 days.

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

Capital Metals PLC  vs.  Coca Cola Co

Capital Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Metals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Capital Metals and Coca Cola

The main advantage of trading using opposite Capital Metals and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Metals 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 Capital Metals PLC and Coca Cola Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.