Correlation Between Coca Cola and BANCO

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

Diversification Opportunities for Coca Cola and BANCO

0.7

Correlation Coefficient

Coca Cola  BANCO

Poor diversification

The 3 months correlation between Coca and BANCO is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and BANCO SANTANDER SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANCO SANTANDER SA 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 BANCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANCO SANTANDER SA has no effect on the direction of Coca Cola i.e., Coca Cola and BANCO go up and down completely randomly.

Pair Corralation between Coca Cola and BANCO

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.82 times more return on investment than BANCO. However, The Coca Cola is 1.22 times less risky than BANCO. It trades about -0.17 of its potential returns per unit of risk. BANCO SANTANDER SA is currently generating about -0.24 per unit of risk. If you would invest  6,260  in The Coca Cola on October 9, 2024 and sell it today you would lose (176.00) from holding The Coca Cola or give up 2.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

The Coca Cola  vs.  BANCO SANTANDER SA

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

BANCO SANTANDER SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANCO SANTANDER SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BANCO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and BANCO

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

The idea behind The Coca Cola and BANCO SANTANDER SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.