Correlation Between GM and Coca-Cola Bottlers
Can any of the company-specific risk be diversified away by investing in both GM and Coca-Cola Bottlers 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 GM and Coca-Cola Bottlers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Coca Cola Bottlers Japan, you can compare the effects of market volatilities on GM and Coca-Cola Bottlers 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 GM with a short position of Coca-Cola Bottlers. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Coca-Cola Bottlers.
Diversification Opportunities for GM and Coca-Cola Bottlers
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GM and Coca-Cola is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Coca Cola Bottlers Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Bottlers and GM 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 General Motors are associated (or correlated) with Coca-Cola Bottlers. 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 Bottlers has no effect on the direction of GM i.e., GM and Coca-Cola Bottlers go up and down completely randomly.
Pair Corralation between GM and Coca-Cola Bottlers
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.51 times more return on investment than Coca-Cola Bottlers. However, General Motors is 1.96 times less risky than Coca-Cola Bottlers. It trades about 0.14 of its potential returns per unit of risk. Coca Cola Bottlers Japan is currently generating about 0.06 per unit of risk. If you would invest 4,478 in General Motors on October 1, 2024 and sell it today you would earn a total of 950.00 from holding General Motors or generate 21.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
General Motors vs. Coca Cola Bottlers Japan
Performance |
Timeline |
General Motors |
Coca Cola Bottlers |
GM and Coca-Cola Bottlers Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with GM and Coca-Cola Bottlers
The main advantage of trading using opposite GM and Coca-Cola Bottlers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Coca-Cola Bottlers 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 Bottlers will offset losses from the drop in Coca-Cola Bottlers' long position.The idea behind General Motors and Coca Cola Bottlers Japan 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.Coca-Cola Bottlers vs. Britvic PLC ADR | Coca-Cola Bottlers vs. Daiwa House Industry | Coca-Cola Bottlers vs. Central Japan Railway | Coca-Cola Bottlers vs. Calbee Inc |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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