Correlation Between Coca Cola and Social Detention

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

Diversification Opportunities for Coca Cola and Social Detention

-0.39

Correlation Coefficient

Coca Cola  Social Detention

Very good diversification

The 3 months correlation between Coca and Social is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Social Detention in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Detention 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 Social Detention. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Detention has no effect on the direction of Coca Cola i.e., Coca Cola and Social Detention go up and down completely randomly.

Pair Corralation between Coca Cola and Social Detention

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Social Detention. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 11.39 times less risky than Social Detention. The stock trades about -0.22 of its potential returns per unit of risk. The Social Detention is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.34  in Social Detention on August 31, 2024 and sell it today you would lose (0.02) from holding Social Detention or give up 5.88% of portfolio value over 90 days.

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

The Coca Cola  vs.  Social Detention

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.

Social Detention

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Social Detention are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Social Detention exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Social Detention

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

The idea behind The Coca Cola and Social Detention 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.