Correlation Between Coca Cola and Capital Group

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

Diversification Opportunities for Coca Cola and Capital Group

-0.79

Correlation Coefficient

Coca Cola  Capital Group

Pay attention - limited upside

The 3 months correlation between Coca and Capital is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Capital Group Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Growth 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Growth has no effect on the direction of Coca Cola i.e., Coca Cola and Capital Group go up and down completely randomly.

Pair Corralation between Coca Cola and Capital Group

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Capital Group. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.62 times less risky than Capital Group. The stock trades about -0.18 of its potential returns per unit of risk. The Capital Group Growth is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,838  in Capital Group Growth on October 8, 2024 and sell it today you would lose (2.00) from holding Capital Group Growth or give up 0.05% of portfolio value over 90 days.

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

The Coca Cola  vs.  Capital Group Growth

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 weak 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.

Capital Group Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Growth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Capital Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Coca Cola and Capital Group

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

The idea behind The Coca Cola and Capital Group Growth 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.