Correlation Between Coca Cola and PACIFIC

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

Diversification Opportunities for Coca Cola and PACIFIC

-0.46

Correlation Coefficient

Coca Cola  PACIFIC

Very good diversification

The 3 months correlation between Coca and PACIFIC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and PACIFIC GAS AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS AND 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS AND has no effect on the direction of Coca Cola i.e., Coca Cola and PACIFIC go up and down completely randomly.

Pair Corralation between Coca Cola and PACIFIC

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 225.41 times less return on investment than PACIFIC. But when comparing it to its historical volatility, The Coca Cola is 78.02 times less risky than PACIFIC. It trades about 0.02 of its potential returns per unit of risk. PACIFIC GAS AND is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,741  in PACIFIC GAS AND on October 5, 2024 and sell it today you would earn a total of  363.00  from holding PACIFIC GAS AND or generate 4.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

The Coca Cola  vs.  PACIFIC GAS AND

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 inconsistent 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.

PACIFIC GAS AND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PACIFIC GAS AND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PACIFIC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and PACIFIC

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

The idea behind The Coca Cola and PACIFIC GAS AND 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.