Correlation Between Coca Cola and Radcom

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

Diversification Opportunities for Coca Cola and Radcom

-0.3

Correlation Coefficient

Coca Cola  Radcom

Very good diversification

The 3 months correlation between Coca and Radcom is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Radcom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radcom 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 Radcom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radcom has no effect on the direction of Coca Cola i.e., Coca Cola and Radcom go up and down completely randomly.

Pair Corralation between Coca Cola and Radcom

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.32 times more return on investment than Radcom. However, The Coca Cola is 3.15 times less risky than Radcom. It trades about 0.13 of its potential returns per unit of risk. Radcom is currently generating about 0.01 per unit of risk. If you would invest  6,294  in The Coca Cola on December 17, 2024 and sell it today you would earn a total of  622.00  from holding The Coca Cola or generate 9.88% return on investment over 90 days.

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

The Coca Cola  vs.  Radcom

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Radcom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Radcom 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 Radcom

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

The idea behind The Coca Cola and Radcom 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.