Correlation Between Coca Cola and International Emerging

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

Diversification Opportunities for Coca Cola and International Emerging

0.88

Correlation Coefficient

Coca Cola  International Emerging

Very poor diversification

The 3 months correlation between Coca and International is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and International Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Emerging 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 International Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Emerging has no effect on the direction of Coca Cola i.e., Coca Cola and International Emerging go up and down completely randomly.

Pair Corralation between Coca Cola and International Emerging

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the International Emerging. In addition to that, Coca Cola is 1.1 times more volatile than International Emerging Markets. It trades about -0.23 of its total potential returns per unit of risk. International Emerging Markets is currently generating about -0.13 per unit of volatility. If you would invest  2,797  in International Emerging Markets on October 9, 2024 and sell it today you would lose (179.00) from holding International Emerging Markets or give up 6.4% of portfolio value over 90 days.

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

The Coca Cola  vs.  International Emerging Markets

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.

International Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Coca Cola and International Emerging

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

The idea behind The Coca Cola and International Emerging Markets 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.