Correlation Between Coca Cola and Citizens Financial

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

By analyzing existing cross correlation between Coca Cola Consolidated and Citizens Financial Corp, you can compare the effects of market volatilities on Coca Cola and Citizens Financial 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 Citizens Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Citizens Financial.

Diversification Opportunities for Coca Cola and Citizens Financial

-0.11

Correlation Coefficient

Coca Cola  Citizens Financial

Good diversification

The 3 months correlation between Coca and Citizens is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Consolidated and Citizens Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citizens Financial Corp 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 Consolidated are associated (or correlated) with Citizens Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citizens Financial Corp has no effect on the direction of Coca Cola i.e., Coca Cola and Citizens Financial go up and down completely randomly.

Pair Corralation between Coca Cola and Citizens Financial

Given the investment horizon of 90 days Coca Cola Consolidated is expected to generate 0.68 times more return on investment than Citizens Financial. However, Coca Cola Consolidated is 1.47 times less risky than Citizens Financial. It trades about 0.11 of its potential returns per unit of risk. Citizens Financial Corp is currently generating about 0.04 per unit of risk. If you would invest  47,919  in Coca Cola Consolidated on October 4, 2024 and sell it today you would earn a total of  78,080  from holding Coca Cola Consolidated or generate 162.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.96%
Values	Daily Returns

Coca Cola Consolidated  vs.  Citizens Financial Corp

Coca Cola Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola Consolidated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Coca Cola is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Citizens Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citizens Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Citizens Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Citizens Financial

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

The idea behind Coca Cola Consolidated and Citizens Financial Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.