Correlation Between Coca Cola and AmTrust Financial

Can any of the company-specific risk be diversified away by investing in both Coca Cola and AmTrust Financial 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 AmTrust Financial 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 AmTrust Financial Services, you can compare the effects of market volatilities on Coca Cola and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and AmTrust Financial.

Diversification Opportunities for Coca Cola and AmTrust Financial

0.41

Correlation Coefficient

Coca Cola  AmTrust Financial

Very weak diversification

The 3 months correlation between Coca and AmTrust is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Coca Cola i.e., Coca Cola and AmTrust Financial go up and down completely randomly.

Pair Corralation between Coca Cola and AmTrust Financial

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.49 times more return on investment than AmTrust Financial. However, The Coca Cola is 2.05 times less risky than AmTrust Financial. It trades about 0.19 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about 0.03 per unit of risk. If you would invest  6,158  in The Coca Cola on December 28, 2024 and sell it today you would earn a total of  916.00  from holding The Coca Cola or generate 14.87% return on investment over 90 days.

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

The Coca Cola  vs.  AmTrust Financial Services

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

AmTrust Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, AmTrust Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and AmTrust Financial

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

The idea behind The Coca Cola and AmTrust Financial Services 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.