Correlation Between Coca Cola and NEXEN

Can any of the company-specific risk be diversified away by investing in both Coca Cola and NEXEN 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 NEXEN 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 NEXEN INC 64, you can compare the effects of market volatilities on Coca Cola and NEXEN 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 NEXEN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and NEXEN.

Diversification Opportunities for Coca Cola and NEXEN

-0.79

Correlation Coefficient

Coca Cola  NEXEN

Pay attention - limited upside

The 3 months correlation between Coca and NEXEN is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and NEXEN INC 64 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXEN INC 64 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 NEXEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXEN INC 64 has no effect on the direction of Coca Cola i.e., Coca Cola and NEXEN go up and down completely randomly.

Pair Corralation between Coca Cola and NEXEN

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the NEXEN. In addition to that, Coca Cola is 1.2 times more volatile than NEXEN INC 64. It trades about -0.22 of its total potential returns per unit of risk. NEXEN INC 64 is currently generating about -0.22 per unit of volatility. If you would invest  11,855  in NEXEN INC 64 on September 15, 2024 and sell it today you would lose (249.00) from holding NEXEN INC 64 or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.31%
Values	Daily Returns

The Coca Cola  vs.  NEXEN INC 64

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.

NEXEN INC 64

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEXEN INC 64 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for NEXEN INC 64 investors.

Pair Trading with Coca Cola and NEXEN

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

The idea behind The Coca Cola and NEXEN INC 64 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.