Correlation Between Coca Cola and IShares Morningstar

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

Diversification Opportunities for Coca Cola and IShares Morningstar

0.13

Correlation Coefficient

Coca Cola  IShares Morningstar

Average diversification

The 3 months correlation between Coca and IShares is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and iShares Morningstar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar 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 Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar has no effect on the direction of Coca Cola i.e., Coca Cola and IShares Morningstar go up and down completely randomly.

Pair Corralation between Coca Cola and IShares Morningstar

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the IShares Morningstar. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.4 times less risky than IShares Morningstar. The stock trades about -0.14 of its potential returns per unit of risk. The iShares Morningstar Small Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,881  in iShares Morningstar Small Cap on October 26, 2024 and sell it today you would earn a total of  256.00  from holding iShares Morningstar Small Cap or generate 4.35% return on investment over 90 days.

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

The Coca Cola  vs.  iShares Morningstar Small Cap

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 weak 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 Morningstar

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Morningstar Small Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, IShares Morningstar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and IShares Morningstar

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

The idea behind The Coca Cola and iShares Morningstar Small Cap 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.