Correlation Between Coca Cola and KANSAS

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

Diversification Opportunities for Coca Cola and KANSAS

-0.75

Correlation Coefficient

Coca Cola  KANSAS

Pay attention - limited upside

The 3 months correlation between Coca and KANSAS is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and KANSAS CITY SOUTHN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KANSAS CITY SOUTHN 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 KANSAS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KANSAS CITY SOUTHN has no effect on the direction of Coca Cola i.e., Coca Cola and KANSAS go up and down completely randomly.

Pair Corralation between Coca Cola and KANSAS

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the KANSAS. In addition to that, Coca Cola is 1.29 times more volatile than KANSAS CITY SOUTHN. It trades about -0.22 of its total potential returns per unit of risk. KANSAS CITY SOUTHN is currently generating about -0.13 per unit of volatility. If you would invest  9,837  in KANSAS CITY SOUTHN on September 9, 2024 and sell it today you would lose (121.00) from holding KANSAS CITY SOUTHN or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	21.54%
Values	Daily Returns

The Coca Cola  vs.  KANSAS CITY SOUTHN

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.

KANSAS CITY SOUTHN

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind The Coca Cola and KANSAS CITY SOUTHN 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.