Correlation Between Coca Cola and Virtus Newfleet

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

Diversification Opportunities for Coca Cola and Virtus Newfleet

0.85

Correlation Coefficient

Coca Cola  Virtus Newfleet

Very poor diversification

The 3 months correlation between Coca and Virtus is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Virtus Newfleet ABSMBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet ABSMBS 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 Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet ABSMBS has no effect on the direction of Coca Cola i.e., Coca Cola and Virtus Newfleet go up and down completely randomly.

Pair Corralation between Coca Cola and Virtus Newfleet

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 5.2 times more return on investment than Virtus Newfleet. However, Coca Cola is 5.2 times more volatile than Virtus Newfleet ABSMBS. It trades about 0.17 of its potential returns per unit of risk. Virtus Newfleet ABSMBS is currently generating about 0.1 per unit of risk. If you would invest  6,199  in The Coca Cola on December 27, 2024 and sell it today you would earn a total of  875.00  from holding The Coca Cola or generate 14.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

The Coca Cola  vs.  Virtus Newfleet ABSMBS

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.

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coca Cola and Virtus Newfleet

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

The idea behind The Coca Cola and Virtus Newfleet ABSMBS 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.