Correlation Between Coca Cola and Sonida Senior

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

Diversification Opportunities for Coca Cola and Sonida Senior

0.41

Correlation Coefficient

Coca Cola  Sonida Senior

Very weak diversification

The 3 months correlation between Coca and Sonida is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of Coca Cola i.e., Coca Cola and Sonida Senior go up and down completely randomly.

Pair Corralation between Coca Cola and Sonida Senior

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 16.17 times less return on investment than Sonida Senior. But when comparing it to its historical volatility, The Coca Cola is 5.79 times less risky than Sonida Senior. It trades about 0.02 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,319  in Sonida Senior Living on September 23, 2024 and sell it today you would earn a total of  1,051  from holding Sonida Senior Living or generate 79.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

The Coca Cola  vs.  Sonida Senior Living

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 weak 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.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Coca Cola and Sonida Senior

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

The idea behind The Coca Cola and Sonida Senior Living 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.