Correlation Between Intel and Coca Cola

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

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

Diversification Opportunities for Intel and Coca Cola

0.67

Correlation Coefficient

Intel  Coca Cola

Poor diversification

The 3 months correlation between Intel and Coca is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Intel 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 Intel 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 Intel 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 Intel i.e., Intel and Coca Cola go up and down completely randomly.

Pair Corralation between Intel and Coca Cola

Assuming the 90 days trading horizon Intel is expected to generate 1.01 times less return on investment than Coca Cola. In addition to that, Intel is 2.39 times more volatile than Coca Cola FEMSA SAB. It trades about 0.07 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.16 per unit of volatility. If you would invest  16,016  in Coca Cola FEMSA SAB on December 30, 2024 and sell it today you would earn a total of  2,855  from holding Coca Cola FEMSA SAB or generate 17.83% return on investment over 90 days.

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

Intel  vs.  Coca Cola FEMSA SAB

Intel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Intel showed solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola FEMSA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Coca Cola sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intel and Coca Cola

The main advantage of trading using opposite Intel and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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 Intel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.