Correlation Between Coca Cola and Tootsie Roll

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

Diversification Opportunities for Coca Cola and Tootsie Roll

-0.71

Correlation Coefficient

Coca Cola  Tootsie Roll

Pay attention - limited upside

The 3 months correlation between Coca and Tootsie is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Tootsie Roll Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tootsie Roll Industries 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 Tootsie Roll. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tootsie Roll Industries has no effect on the direction of Coca Cola i.e., Coca Cola and Tootsie Roll go up and down completely randomly.

Pair Corralation between Coca Cola and Tootsie Roll

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.57 times more return on investment than Tootsie Roll. However, The Coca Cola is 1.76 times less risky than Tootsie Roll. It trades about 0.03 of its potential returns per unit of risk. Tootsie Roll Industries is currently generating about -0.03 per unit of risk. If you would invest  5,652  in The Coca Cola on October 11, 2024 and sell it today you would earn a total of  519.00  from holding The Coca Cola or generate 9.18% return on investment over 90 days.

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

The Coca Cola  vs.  Tootsie Roll Industries

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.

Tootsie Roll Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tootsie Roll is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Coca Cola and Tootsie Roll

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

The idea behind The Coca Cola and Tootsie Roll Industries 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..