Correlation Between Coca Cola and Molinos Rio

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

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

Diversification Opportunities for Coca Cola and Molinos Rio

-0.53

Correlation Coefficient

Coca Cola  Molinos Rio

Excellent diversification

The 3 months correlation between Coca and Molinos is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Molinos Rio de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molinos Rio de and Coca Cola 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 The Coca Cola are associated (or correlated) with Molinos Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molinos Rio de has no effect on the direction of Coca Cola i.e., Coca Cola and Molinos Rio go up and down completely randomly.

Pair Corralation between Coca Cola and Molinos Rio

Assuming the 90 days horizon The Coca Cola is expected to generate 0.42 times more return on investment than Molinos Rio. However, The Coca Cola is 2.39 times less risky than Molinos Rio. It trades about 0.26 of its potential returns per unit of risk. Molinos Rio de is currently generating about -0.15 per unit of risk. If you would invest  1,477,500  in The Coca Cola on December 27, 2024 and sell it today you would earn a total of  342,500  from holding The Coca Cola or generate 23.18% return on investment over 90 days.

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

The Coca Cola  vs.  Molinos Rio de

Coca Cola

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Coca Cola sustained solid returns over the last few months and may actually be approaching a breakup point.

Molinos Rio de

Risk-Adjusted Performance

Very Weak

Over the last 90 days Molinos Rio de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Coca Cola and Molinos Rio

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

The idea behind The Coca Cola and Molinos Rio de 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.