Correlation Between Coca Cola and Better Choice
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Better Choice 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 Better Choice 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 Better Choice, you can compare the effects of market volatilities on Coca Cola and Better Choice 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 Better Choice. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Better Choice.
Diversification Opportunities for Coca Cola and Better Choice
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coca and Better is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Better Choice in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better Choice 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 Better Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better Choice has no effect on the direction of Coca Cola i.e., Coca Cola and Better Choice go up and down completely randomly.
Pair Corralation between Coca Cola and Better Choice
Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Better Choice. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 6.61 times less risky than Better Choice. The stock trades about -0.13 of its potential returns per unit of risk. The Better Choice is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 210.00 in Better Choice on October 6, 2024 and sell it today you would earn a total of 26.00 from holding Better Choice or generate 12.38% 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. Better Choice
Performance |
Timeline |
Coca Cola |
Better Choice |
Coca Cola and Better Choice Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coca Cola and Better Choice
The main advantage of trading using opposite Coca Cola and Better Choice positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Better Choice 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 Better Choice will offset losses from the drop in Better Choice's long position.Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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Check out your portfolio center.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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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