Correlation Between Coca Cola and Simplify Stable

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

Diversification Opportunities for Coca Cola and Simplify Stable

0.85

Correlation Coefficient

Coca Cola  Simplify Stable

Very poor diversification

The 3 months correlation between Coca and Simplify is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Simplify Stable Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Stable Income 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 Simplify Stable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Stable Income has no effect on the direction of Coca Cola i.e., Coca Cola and Simplify Stable go up and down completely randomly.

Pair Corralation between Coca Cola and Simplify Stable

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 8.39 times more return on investment than Simplify Stable. However, Coca Cola is 8.39 times more volatile than Simplify Stable Income. It trades about 0.19 of its potential returns per unit of risk. Simplify Stable Income is currently generating about 0.26 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	Strong
Accuracy	98.36%
Values	Daily Returns

The Coca Cola  vs.  Simplify Stable Income

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 unfluctuating basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

Simplify Stable Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Stable Income are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Simplify Stable is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Coca Cola and Simplify Stable

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

The idea behind The Coca Cola and Simplify Stable Income 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.