Correlation Between Coca Cola and Vanguard Mid

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

Diversification Opportunities for Coca Cola and Vanguard Mid

-0.78

Correlation Coefficient

Coca Cola  Vanguard Mid

Pay attention - limited upside

The 3 months correlation between Coca and Vanguard is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap 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 Vanguard Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Coca Cola i.e., Coca Cola and Vanguard Mid go up and down completely randomly.

Pair Corralation between Coca Cola and Vanguard Mid

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Vanguard Mid. In addition to that, Coca Cola is 1.22 times more volatile than Vanguard Mid Cap Index. It trades about -0.22 of its total potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about 0.27 per unit of volatility. If you would invest  25,203  in Vanguard Mid Cap Index on September 3, 2024 and sell it today you would earn a total of  3,156  from holding Vanguard Mid Cap Index or generate 12.52% return on investment over 90 days.

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

The Coca Cola  vs.  Vanguard Mid Cap Index

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.

Vanguard Mid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and Vanguard Mid

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

The idea behind The Coca Cola and Vanguard Mid Cap Index 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.