Correlation Between Coca Cola and IShares Cybersecurity

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

Diversification Opportunities for Coca Cola and IShares Cybersecurity

-0.62

Correlation Coefficient

Coca Cola  IShares Cybersecurity

Excellent diversification

The 3 months correlation between Coca and IShares is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and iShares Cybersecurity and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Cybersecurity and 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 Cybersecurity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Cybersecurity and has no effect on the direction of Coca Cola i.e., Coca Cola and IShares Cybersecurity go up and down completely randomly.

Pair Corralation between Coca Cola and IShares Cybersecurity

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.7 times more return on investment than IShares Cybersecurity. However, The Coca Cola is 1.43 times less risky than IShares Cybersecurity. It trades about 0.0 of its potential returns per unit of risk. iShares Cybersecurity and is currently generating about -0.01 per unit of risk. If you would invest  6,272  in The Coca Cola on September 13, 2024 and sell it today you would lose (8.00) from holding The Coca Cola or give up 0.13% 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.  iShares Cybersecurity and

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.

iShares Cybersecurity and

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Cybersecurity and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, IShares Cybersecurity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and IShares Cybersecurity

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

The idea behind The Coca Cola and iShares Cybersecurity and 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.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.