Correlation Between Coca Cola and Innovator

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Innovator 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 Innovator 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 Innovator SP 500, you can compare the effects of market volatilities on Coca Cola and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Innovator.

Diversification Opportunities for Coca Cola and Innovator

0.42

Correlation Coefficient

Coca Cola  Innovator

Very weak diversification

The 3 months correlation between Coca and Innovator is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Coca Cola i.e., Coca Cola and Innovator go up and down completely randomly.

Pair Corralation between Coca Cola and Innovator

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 3.78 times more return on investment than Innovator. However, Coca Cola is 3.78 times more volatile than Innovator SP 500. It trades about 0.45 of its potential returns per unit of risk. Innovator SP 500 is currently generating about -0.03 per unit of risk. If you would invest  6,335  in The Coca Cola on December 3, 2024 and sell it today you would earn a total of  786.00  from holding The Coca Cola or generate 12.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

The Coca Cola  vs.  Innovator SP 500

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Innovator SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Innovator is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coca Cola and Innovator

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

The idea behind The Coca Cola and Innovator SP 500 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.