Correlation Between Coca Cola and GBX International

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

Diversification Opportunities for Coca Cola and GBX International

-0.65

Correlation Coefficient

Coca Cola  GBX International

Excellent diversification

The 3 months correlation between Coca and GBX is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and GBX International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBX International 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 GBX International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBX International has no effect on the direction of Coca Cola i.e., Coca Cola and GBX International go up and down completely randomly.

Pair Corralation between Coca Cola and GBX International

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 450.6 times less return on investment than GBX International. But when comparing it to its historical volatility, The Coca Cola is 112.92 times less risky than GBX International. It trades about 0.02 of its potential returns per unit of risk. GBX International Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8.00  in GBX International Group on October 4, 2024 and sell it today you would lose (7.98) from holding GBX International Group or give up 99.75% 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.  GBX International Group

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.

GBX International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GBX International Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, GBX International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and GBX International

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

The idea behind The Coca Cola and GBX International Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.