Correlation Between Coca Cola and Sable Offshore

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

Diversification Opportunities for Coca Cola and Sable Offshore

0.25

Correlation Coefficient

Coca Cola  Sable Offshore

Modest diversification

The 3 months correlation between Coca and Sable is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore Corp 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 Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of Coca Cola i.e., Coca Cola and Sable Offshore go up and down completely randomly.

Pair Corralation between Coca Cola and Sable Offshore

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 18.64 times less return on investment than Sable Offshore. But when comparing it to its historical volatility, The Coca Cola is 5.08 times less risky than Sable Offshore. It trades about 0.03 of its potential returns per unit of risk. Sable Offshore Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,168  in Sable Offshore Corp on September 20, 2024 and sell it today you would earn a total of  208.50  from holding Sable Offshore Corp or generate 9.62% return on investment over 90 days.

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

The Coca Cola  vs.  Sable Offshore Corp

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.

Sable Offshore Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sable Offshore Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sable Offshore 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 Sable Offshore

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

The idea behind The Coca Cola and Sable Offshore Corp 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.