Correlation Between Expat Czech and Coca Cola

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

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

Diversification Opportunities for Expat Czech and Coca Cola

0.76

Correlation Coefficient

Expat Czech  Coca Cola

Poor diversification

The 3 months correlation between Expat and Coca is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Expat Czech PX and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA and Expat Czech 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 Expat Czech PX 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 FEMSA has no effect on the direction of Expat Czech i.e., Expat Czech and Coca Cola go up and down completely randomly.

Pair Corralation between Expat Czech and Coca Cola

Assuming the 90 days trading horizon Expat Czech PX is expected to generate 0.27 times more return on investment than Coca Cola. However, Expat Czech PX is 3.69 times less risky than Coca Cola. It trades about 0.25 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.05 per unit of risk. If you would invest  149.00  in Expat Czech PX on December 30, 2024 and sell it today you would earn a total of  26.00  from holding Expat Czech PX or generate 17.45% return on investment over 90 days.

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

Expat Czech PX  vs.  Coca Cola FEMSA SAB

Expat Czech PX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Expat Czech PX are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Expat Czech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola FEMSA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 3 (%) 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 April 2025.

Pair Trading with Expat Czech and Coca Cola

The main advantage of trading using opposite Expat Czech and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Expat Czech 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 Expat Czech PX and Coca Cola FEMSA SAB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.