Correlation Between Coca Cola and Boardwalktech Software

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

Diversification Opportunities for Coca Cola and Boardwalktech Software

0.16

Correlation Coefficient

Coca Cola  Boardwalktech Software

Average diversification

The 3 months correlation between Coca and Boardwalktech is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Boardwalktech Software Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boardwalktech Software 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 Boardwalktech Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boardwalktech Software has no effect on the direction of Coca Cola i.e., Coca Cola and Boardwalktech Software go up and down completely randomly.

Pair Corralation between Coca Cola and Boardwalktech Software

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 3.74 times less return on investment than Boardwalktech Software. But when comparing it to its historical volatility, The Coca Cola is 8.06 times less risky than Boardwalktech Software. It trades about 0.18 of its potential returns per unit of risk. Boardwalktech Software Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Boardwalktech Software Corp on December 30, 2024 and sell it today you would earn a total of  1.70  from holding Boardwalktech Software Corp or generate 26.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

The Coca Cola  vs.  Boardwalktech Software Corp

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.

Boardwalktech Software

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boardwalktech Software Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Boardwalktech Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Boardwalktech Software

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

The idea behind The Coca Cola and Boardwalktech Software Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.