Correlation Between Coca Cola and Pacer Lunt

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

Diversification Opportunities for Coca Cola and Pacer Lunt

-0.57

Correlation Coefficient

Coca Cola  Pacer Lunt

Excellent diversification

The 3 months correlation between Coca and Pacer is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Pacer Lunt MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Lunt MidCap 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 Pacer Lunt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Lunt MidCap has no effect on the direction of Coca Cola i.e., Coca Cola and Pacer Lunt go up and down completely randomly.

Pair Corralation between Coca Cola and Pacer Lunt

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.76 times more return on investment than Pacer Lunt. However, The Coca Cola is 1.32 times less risky than Pacer Lunt. It trades about -0.18 of its potential returns per unit of risk. Pacer Lunt MidCap is currently generating about -0.15 per unit of risk. If you would invest  6,260  in The Coca Cola on October 9, 2024 and sell it today you would lose (179.00) from holding The Coca Cola or give up 2.86% of portfolio value over 90 days.

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

The Coca Cola  vs.  Pacer Lunt MidCap

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pacer Lunt MidCap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacer Lunt MidCap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Pacer Lunt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coca Cola and Pacer Lunt

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

The idea behind The Coca Cola and Pacer Lunt MidCap 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.