Correlation Between Coca Cola and Heartland Banccorp

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

Diversification Opportunities for Coca Cola and Heartland Banccorp

-0.23

Correlation Coefficient

Coca Cola  Heartland Banccorp

Very good diversification

The 3 months correlation between Coca and Heartland is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Heartland Banccorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heartland Banccorp 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 Heartland Banccorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heartland Banccorp has no effect on the direction of Coca Cola i.e., Coca Cola and Heartland Banccorp go up and down completely randomly.

Pair Corralation between Coca Cola and Heartland Banccorp

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.78 times more return on investment than Heartland Banccorp. However, The Coca Cola is 1.29 times less risky than Heartland Banccorp. It trades about 0.18 of its potential returns per unit of risk. Heartland Banccorp is currently generating about 0.12 per unit of risk. If you would invest  6,158  in The Coca Cola on December 28, 2024 and sell it today you would earn a total of  879.00  from holding The Coca Cola or generate 14.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.34%
Values	Daily Returns

The Coca Cola  vs.  Heartland Banccorp

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

Heartland Banccorp

Risk-Adjusted Performance

OK

Over the last 90 days Heartland Banccorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very fragile basic indicators, Heartland Banccorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Coca Cola and Heartland Banccorp

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

The idea behind The Coca Cola and Heartland Banccorp 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.