Correlation Between Graham Holdings and 191216CW8

Can any of the company-specific risk be diversified away by investing in both Graham Holdings and 191216CW8 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 Graham Holdings and 191216CW8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Graham Holdings Co and COCA COLA CO, you can compare the effects of market volatilities on Graham Holdings and 191216CW8 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 Graham Holdings with a short position of 191216CW8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham Holdings and 191216CW8.

Diversification Opportunities for Graham Holdings and 191216CW8

-0.22

Correlation Coefficient

Graham Holdings  191216CW8

Very good diversification

The 3 months correlation between Graham and 191216CW8 is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Graham Holdings Co and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO and Graham Holdings 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 Graham Holdings Co are associated (or correlated) with 191216CW8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Graham Holdings i.e., Graham Holdings and 191216CW8 go up and down completely randomly.

Pair Corralation between Graham Holdings and 191216CW8

Considering the 90-day investment horizon Graham Holdings Co is expected to generate 2.2 times more return on investment than 191216CW8. However, Graham Holdings is 2.2 times more volatile than COCA COLA CO. It trades about 0.08 of its potential returns per unit of risk. COCA COLA CO is currently generating about -0.02 per unit of risk. If you would invest  79,402  in Graham Holdings Co on October 11, 2024 and sell it today you would earn a total of  8,094  from holding Graham Holdings Co or generate 10.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Graham Holdings Co  vs.  COCA COLA CO

Graham Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Graham Holdings Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical indicators, Graham Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

COCA A CO

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. Despite somewhat strong basic indicators, 191216CW8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Graham Holdings and 191216CW8

The main advantage of trading using opposite Graham Holdings and 191216CW8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham Holdings position performs unexpectedly, 191216CW8 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 191216CW8 will offset losses from the drop in 191216CW8's long position.

The idea behind Graham Holdings Co 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.