Correlation Between Coca Cola and SOUTHERN

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

Diversification Opportunities for Coca Cola and SOUTHERN

0.77

Correlation Coefficient

Coca Cola  SOUTHERN

Poor diversification

The 3 months correlation between Coca and SOUTHERN is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P 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 SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of Coca Cola i.e., Coca Cola and SOUTHERN go up and down completely randomly.

Pair Corralation between Coca Cola and SOUTHERN

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the SOUTHERN. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.39 times less risky than SOUTHERN. The stock trades about -0.11 of its potential returns per unit of risk. The SOUTHERN PER CORP is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,455  in SOUTHERN PER CORP on September 24, 2024 and sell it today you would earn a total of  355.00  from holding SOUTHERN PER CORP or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	76.19%
Values	Daily Returns

The Coca Cola  vs.  SOUTHERN PER CORP

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.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal 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 SOUTHERN PER CORP investors.

Pair Trading with Coca Cola and SOUTHERN

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

The idea behind The Coca Cola and SOUTHERN PER CORP 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.