Correlation Between Coca Cola and Graham

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Graham 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 Graham 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 Graham Holdings 575, you can compare the effects of market volatilities on Coca Cola and Graham 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 Graham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Graham.

Diversification Opportunities for Coca Cola and Graham

0.21

Correlation Coefficient

Coca Cola  Graham

Modest diversification

The 3 months correlation between Coca and Graham is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Graham Holdings 575 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham Holdings 575 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 Graham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham Holdings 575 has no effect on the direction of Coca Cola i.e., Coca Cola and Graham go up and down completely randomly.

Pair Corralation between Coca Cola and Graham

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Graham. In addition to that, Coca Cola is 4.26 times more volatile than Graham Holdings 575. It trades about -0.1 of its total potential returns per unit of risk. Graham Holdings 575 is currently generating about -0.2 per unit of volatility. If you would invest  9,997  in Graham Holdings 575 on October 11, 2024 and sell it today you would lose (48.00) from holding Graham Holdings 575 or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	57.14%
Values	Daily Returns

The Coca Cola  vs.  Graham Holdings 575

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.

Graham Holdings 575

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graham Holdings 575 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Graham 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 Graham

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

The idea behind The Coca Cola and Graham Holdings 575 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.