Correlation Between Coca Cola and Bell Copper

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

Diversification Opportunities for Coca Cola and Bell Copper

0.6

Correlation Coefficient

Coca Cola  Bell Copper

Poor diversification

The 3 months correlation between Coca and Bell is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Bell Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bell Copper 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 Bell Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bell Copper has no effect on the direction of Coca Cola i.e., Coca Cola and Bell Copper go up and down completely randomly.

Pair Corralation between Coca Cola and Bell Copper

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 18.62 times less return on investment than Bell Copper. But when comparing it to its historical volatility, The Coca Cola is 12.99 times less risky than Bell Copper. It trades about 0.02 of its potential returns per unit of risk. Bell Copper is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Bell Copper on September 20, 2024 and sell it today you would lose (7.00) from holding Bell Copper or give up 73.68% of portfolio value over 90 days.

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

The Coca Cola  vs.  Bell Copper

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 fragile 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.

Bell Copper

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bell Copper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Bell Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Bell Copper

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

The idea behind The Coca Cola and Bell Copper 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.