Correlation Between Coca Cola and DAIMLERCHRYSLER

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

Diversification Opportunities for Coca Cola and DAIMLERCHRYSLER

0.26

Correlation Coefficient

Coca Cola  DAIMLERCHRYSLER

Modest diversification

The 3 months correlation between Coca and DAIMLERCHRYSLER is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and DAIMLERCHRYSLER NORTH AMER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIMLERCHRYSLER NORTH 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 DAIMLERCHRYSLER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIMLERCHRYSLER NORTH has no effect on the direction of Coca Cola i.e., Coca Cola and DAIMLERCHRYSLER go up and down completely randomly.

Pair Corralation between Coca Cola and DAIMLERCHRYSLER

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 21.32 times less return on investment than DAIMLERCHRYSLER. But when comparing it to its historical volatility, The Coca Cola is 2.26 times less risky than DAIMLERCHRYSLER. It trades about 0.02 of its potential returns per unit of risk. DAIMLERCHRYSLER NORTH AMER is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  11,700  in DAIMLERCHRYSLER NORTH AMER on October 21, 2024 and sell it today you would earn a total of  798.00  from holding DAIMLERCHRYSLER NORTH AMER or generate 6.82% return on investment over 90 days.

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

The Coca Cola  vs.  DAIMLERCHRYSLER NORTH AMER

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.

DAIMLERCHRYSLER NORTH

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DAIMLERCHRYSLER NORTH AMER are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DAIMLERCHRYSLER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and DAIMLERCHRYSLER

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

The idea behind The Coca Cola and DAIMLERCHRYSLER NORTH AMER 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.