Correlation Between Coca Cola and Lord Abbett

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

Diversification Opportunities for Coca Cola and Lord Abbett

-0.89

Correlation Coefficient

Coca Cola  Lord Abbett

Pay attention - limited upside

The 3 months correlation between Coca and Lord is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Lord Abbett Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lord Abbett Investment 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 Lord Abbett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lord Abbett Investment has no effect on the direction of Coca Cola i.e., Coca Cola and Lord Abbett go up and down completely randomly.

Pair Corralation between Coca Cola and Lord Abbett

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate about the same return on investment as Lord Abbett Investment. However, Coca Cola is 6.81 times more volatile than Lord Abbett Investment. It trades about 0.04 of its potential returns per unit of risk. Lord Abbett Investment is currently producing about 0.24 per unit of risk. If you would invest  956.00  in Lord Abbett Investment on October 7, 2024 and sell it today you would earn a total of  69.00  from holding Lord Abbett Investment or generate 7.22% return on investment over 90 days.

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

The Coca Cola  vs.  Lord Abbett Investment

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 inconsistent 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.

Lord Abbett Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lord Abbett Investment are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Lord Abbett 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 Lord Abbett

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

The idea behind The Coca Cola and Lord Abbett Investment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.