Correlation Between Coca Cola and Erste Group
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Erste 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 Erste 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 Erste Group Bank, you can compare the effects of market volatilities on Coca Cola and Erste 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 Erste Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Erste Group.
Diversification Opportunities for Coca Cola and Erste Group
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Erste is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Erste Group Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erste Group Bank 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 Erste Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erste Group Bank has no effect on the direction of Coca Cola i.e., Coca Cola and Erste Group go up and down completely randomly.
Pair Corralation between Coca Cola and Erste Group
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.11 times less return on investment than Erste Group. But when comparing it to its historical volatility, The Coca Cola is 2.12 times less risky than Erste Group. It trades about 0.33 of its potential returns per unit of risk. Erste Group Bank is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,035 in Erste Group Bank on December 5, 2024 and sell it today you would earn a total of 340.00 from holding Erste Group Bank or generate 11.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
The Coca Cola vs. Erste Group Bank
Performance |
Timeline |
Coca Cola |
Erste Group Bank |
Coca Cola and Erste Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coca Cola and Erste Group
The main advantage of trading using opposite Coca Cola and Erste Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Erste 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 Erste Group will offset losses from the drop in Erste Group's long position.Coca Cola vs. Vita Coco | Coca Cola vs. Keurig Dr Pepper | Coca Cola vs. PepsiCo | Coca Cola vs. Coca Cola Femsa SAB |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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