Correlation Between Coca Cola and TARGET

Can any of the company-specific risk be diversified away by investing in both Coca Cola and TARGET 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 TARGET 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 TARGET P 7, you can compare the effects of market volatilities on Coca Cola and TARGET 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 TARGET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and TARGET.

Diversification Opportunities for Coca Cola and TARGET

-0.39

Correlation Coefficient

Coca Cola  TARGET

Very good diversification

The 3 months correlation between Coca and TARGET is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and TARGET P 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TARGET P 7 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 TARGET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TARGET P 7 has no effect on the direction of Coca Cola i.e., Coca Cola and TARGET go up and down completely randomly.

Pair Corralation between Coca Cola and TARGET

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.79 times less return on investment than TARGET. But when comparing it to its historical volatility, The Coca Cola is 1.26 times less risky than TARGET. It trades about 0.17 of its potential returns per unit of risk. TARGET P 7 is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,910  in TARGET P 7 on December 21, 2024 and sell it today you would earn a total of  804.00  from holding TARGET P 7 or generate 7.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

The Coca Cola  vs.  TARGET P 7

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 uncertain basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

TARGET P 7

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, TARGET sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and TARGET

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

The idea behind The Coca Cola and TARGET P 7 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.