Correlation Between Coca Cola and Novelis

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Novelis 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 Novelis 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 Novelis Corp 475, you can compare the effects of market volatilities on Coca Cola and Novelis 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 Novelis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Novelis.

Diversification Opportunities for Coca Cola and Novelis

0.62

Correlation Coefficient

Coca Cola  Novelis

Poor diversification

The 3 months correlation between Coca and Novelis is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Novelis Corp 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novelis Corp 475 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 Novelis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novelis Corp 475 has no effect on the direction of Coca Cola i.e., Coca Cola and Novelis go up and down completely randomly.

Pair Corralation between Coca Cola and Novelis

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Novelis. In addition to that, Coca Cola is 1.5 times more volatile than Novelis Corp 475. It trades about -0.21 of its total potential returns per unit of risk. Novelis Corp 475 is currently generating about -0.22 per unit of volatility. If you would invest  9,634  in Novelis Corp 475 on September 17, 2024 and sell it today you would lose (754.00) from holding Novelis Corp 475 or give up 7.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

The Coca Cola  vs.  Novelis Corp 475

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.

Novelis Corp 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novelis Corp 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Novelis Corp 475 investors.

Pair Trading with Coca Cola and Novelis

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

The idea behind The Coca Cola and Novelis Corp 475 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.