Correlation Between Coca Cola and IShares

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

Diversification Opportunities for Coca Cola and IShares

-0.88

Correlation Coefficient

Coca Cola  IShares

Pay attention - limited upside

The 3 months correlation between Coca and IShares is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Coca Cola i.e., Coca Cola and IShares go up and down completely randomly.

Pair Corralation between Coca Cola and IShares

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 7.53 times more return on investment than IShares. However, Coca Cola is 7.53 times more volatile than IShares. It trades about 0.11 of its potential returns per unit of risk. IShares is currently generating about -0.08 per unit of risk. If you would invest  6,139  in The Coca Cola on September 18, 2024 and sell it today you would earn a total of  116.00  from holding The Coca Cola or generate 1.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	55.0%
Values	Daily Returns

The Coca Cola  vs.  IShares

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 fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

IShares

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, IShares is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and IShares

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

The idea behind The Coca Cola and IShares 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.