Correlation Between Independence Realty and Coca Cola

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

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

Diversification Opportunities for Independence Realty and Coca Cola

-0.47

Correlation Coefficient

Independence Realty  Coca Cola

Very good diversification

The 3 months correlation between Independence and Coca is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Independence Realty Trust and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Independence Realty 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 Independence Realty Trust 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 has no effect on the direction of Independence Realty i.e., Independence Realty and Coca Cola go up and down completely randomly.

Pair Corralation between Independence Realty and Coca Cola

Considering the 90-day investment horizon Independence Realty Trust is expected to generate 1.48 times more return on investment than Coca Cola. However, Independence Realty is 1.48 times more volatile than The Coca Cola. It trades about 0.04 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.23 per unit of risk. If you would invest  2,079  in Independence Realty Trust on September 13, 2024 and sell it today you would earn a total of  55.00  from holding Independence Realty Trust or generate 2.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Independence Realty Trust  vs.  The Coca Cola

Independence Realty Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Independence Realty Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Independence Realty is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Independence Realty and Coca Cola

The main advantage of trading using opposite Independence Realty and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independence Realty 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 Independence Realty Trust and The Coca Cola 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.