Correlation Between Coca Cola and NBCUNIVERSAL

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

Diversification Opportunities for Coca Cola and NBCUNIVERSAL

0.72

Correlation Coefficient

Coca Cola  NBCUNIVERSAL

Poor diversification

The 3 months correlation between Coca and NBCUNIVERSAL is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and NBCUNIVERSAL MEDIA LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBCUNIVERSAL MEDIA LLC 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 NBCUNIVERSAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBCUNIVERSAL MEDIA LLC has no effect on the direction of Coca Cola i.e., Coca Cola and NBCUNIVERSAL go up and down completely randomly.

Pair Corralation between Coca Cola and NBCUNIVERSAL

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.35 times more return on investment than NBCUNIVERSAL. However, The Coca Cola is 2.87 times less risky than NBCUNIVERSAL. It trades about 0.12 of its potential returns per unit of risk. NBCUNIVERSAL MEDIA LLC is currently generating about -0.24 per unit of risk. If you would invest  6,139  in The Coca Cola on September 19, 2024 and sell it today you would earn a total of  146.00  from holding The Coca Cola or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	72.73%
Values	Daily Returns

The Coca Cola  vs.  NBCUNIVERSAL MEDIA LLC

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 fragile 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.

NBCUNIVERSAL MEDIA LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBCUNIVERSAL MEDIA LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for NBCUNIVERSAL MEDIA LLC investors.

Pair Trading with Coca Cola and NBCUNIVERSAL

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

The idea behind The Coca Cola and NBCUNIVERSAL MEDIA LLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.