Correlation Between Coca Cola and Model N

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

Diversification Opportunities for Coca Cola and Model N

-0.48

Correlation Coefficient

Coca Cola  Model N

Very good diversification

The 3 months correlation between Coca and Model is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Model N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Model N 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 Model N. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Model N has no effect on the direction of Coca Cola i.e., Coca Cola and Model N go up and down completely randomly.

Pair Corralation between Coca Cola and Model N

If you would invest  3,000  in Model N on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Model N or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

The Coca Cola  vs.  Model N

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.

Model N

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Coca Cola and Model N

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

The idea behind The Coca Cola and Model N 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.