Correlation Between Coca Cola and SPDR Russell

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

Diversification Opportunities for Coca Cola and SPDR Russell

-0.56

Correlation Coefficient

Coca Cola  SPDR Russell

Excellent diversification

The 3 months correlation between Coca and SPDR is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and SPDR Russell Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell Small 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 SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell Small has no effect on the direction of Coca Cola i.e., Coca Cola and SPDR Russell go up and down completely randomly.

Pair Corralation between Coca Cola and SPDR Russell

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 1.16 times more return on investment than SPDR Russell. However, Coca Cola is 1.16 times more volatile than SPDR Russell Small. It trades about 0.14 of its potential returns per unit of risk. SPDR Russell Small is currently generating about -0.07 per unit of risk. If you would invest  6,211  in The Coca Cola on December 25, 2024 and sell it today you would earn a total of  672.00  from holding The Coca Cola or generate 10.82% return on investment over 90 days.

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

The Coca Cola  vs.  SPDR Russell Small

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 11 (%) 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.

SPDR Russell Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Russell Small has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, SPDR Russell is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coca Cola and SPDR Russell

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

The idea behind The Coca Cola and SPDR Russell Small 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.