Correlation Between Coca Cola and 828807DT1

Can any of the company-specific risk be diversified away by investing in both Coca Cola and 828807DT1 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 828807DT1 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 SPG 265 01 FEB 32, you can compare the effects of market volatilities on Coca Cola and 828807DT1 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 828807DT1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and 828807DT1.

Diversification Opportunities for Coca Cola and 828807DT1

0.34

Correlation Coefficient

Coca Cola  828807DT1

Weak diversification

The 3 months correlation between Coca and 828807DT1 is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and SPG 265 01 FEB 32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPG 265 01 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 828807DT1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPG 265 01 has no effect on the direction of Coca Cola i.e., Coca Cola and 828807DT1 go up and down completely randomly.

Pair Corralation between Coca Cola and 828807DT1

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 1.22 times more return on investment than 828807DT1. However, Coca Cola is 1.22 times more volatile than SPG 265 01 FEB 32. It trades about 0.45 of its potential returns per unit of risk. SPG 265 01 FEB 32 is currently generating about -0.07 per unit of risk. If you would invest  6,335  in The Coca Cola on December 4, 2024 and sell it today you would earn a total of  811.50  from holding The Coca Cola or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Coca Cola  vs.  SPG 265 01 FEB 32

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

SPG 265 01

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPG 265 01 FEB 32 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 828807DT1 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 828807DT1

The main advantage of trading using opposite Coca Cola and 828807DT1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, 828807DT1 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 828807DT1 will offset losses from the drop in 828807DT1's long position.

The idea behind The Coca Cola and SPG 265 01 FEB 32 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.