Correlation Between Coca Cola and Franklin FTSE

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

Diversification Opportunities for Coca Cola and Franklin FTSE

-0.67

Correlation Coefficient

Coca Cola  Franklin FTSE

Excellent diversification

The 3 months correlation between Coca and Franklin is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Franklin FTSE Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Japan 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 Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Japan has no effect on the direction of Coca Cola i.e., Coca Cola and Franklin FTSE go up and down completely randomly.

Pair Corralation between Coca Cola and Franklin FTSE

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Franklin FTSE. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.4 times less risky than Franklin FTSE. The stock trades about -0.23 of its potential returns per unit of risk. The Franklin FTSE Japan is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,913  in Franklin FTSE Japan on September 13, 2024 and sell it today you would earn a total of  265.00  from holding Franklin FTSE Japan or generate 9.1% return on investment over 90 days.

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

The Coca Cola  vs.  Franklin FTSE Japan

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.

Franklin FTSE Japan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Japan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward-looking indicators, Franklin FTSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and Franklin FTSE

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

The idea behind The Coca Cola and Franklin FTSE Japan 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.