Correlation Between Coca Cola and Catalent

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

Diversification Opportunities for Coca Cola and Catalent

-0.12

Correlation Coefficient

Coca Cola  Catalent

Good diversification

The 3 months correlation between Coca and Catalent is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Coca Cola i.e., Coca Cola and Catalent go up and down completely randomly.

Pair Corralation between Coca Cola and Catalent

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Catalent. In addition to that, Coca Cola is 1.37 times more volatile than Catalent. It trades about -0.1 of its total potential returns per unit of risk. Catalent is currently generating about 0.44 per unit of volatility. If you would invest  6,224  in Catalent on October 11, 2024 and sell it today you would earn a total of  124.00  from holding Catalent or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	35.0%
Values	Daily Returns

The Coca Cola  vs.  Catalent

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 uncertain 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.

Catalent

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively abnormal essential indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Coca Cola and Catalent

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

The idea behind The Coca Cola and Catalent 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.