Correlation Between Coca Cola and Orca Energy

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

Diversification Opportunities for Coca Cola and Orca Energy

0.89

Correlation Coefficient

Coca Cola  Orca Energy

Very poor diversification

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

Pair Corralation between Coca Cola and Orca Energy

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Orca Energy. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 4.15 times less risky than Orca Energy. The stock trades about -0.21 of its potential returns per unit of risk. The Orca Energy Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Orca Energy Group on September 3, 2024 and sell it today you would lose (18.00) from holding Orca Energy Group or give up 8.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

The Coca Cola  vs.  Orca Energy Group

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.

Orca Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orca Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Orca Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coca Cola and Orca Energy

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

The idea behind The Coca Cola and Orca Energy Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.