Correlation Between Karelia Tobacco and Coca Cola

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

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

Diversification Opportunities for Karelia Tobacco and Coca Cola

-0.81

Correlation Coefficient

Karelia Tobacco  Coca Cola

Pay attention - limited upside

The 3 months correlation between Karelia and Coca is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Karelia Tobacco and Coca Cola HBC AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC and Karelia Tobacco 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 Karelia Tobacco 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 HBC has no effect on the direction of Karelia Tobacco i.e., Karelia Tobacco and Coca Cola go up and down completely randomly.

Pair Corralation between Karelia Tobacco and Coca Cola

Assuming the 90 days trading horizon Karelia Tobacco is expected to under-perform the Coca Cola. But the stock apears to be less risky and, when comparing its historical volatility, Karelia Tobacco is 1.04 times less risky than Coca Cola. The stock trades about -0.07 of its potential returns per unit of risk. The Coca Cola HBC AG is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,288  in Coca Cola HBC AG on December 29, 2024 and sell it today you would earn a total of  918.00  from holding Coca Cola HBC AG or generate 27.92% return on investment over 90 days.

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

Karelia Tobacco  vs.  Coca Cola HBC AG

Karelia Tobacco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Karelia Tobacco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Karelia Tobacco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Coca Cola HBC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola HBC AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Coca Cola unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Karelia Tobacco and Coca Cola

The main advantage of trading using opposite Karelia Tobacco and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Karelia Tobacco 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 Karelia Tobacco and Coca Cola HBC AG 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.