Correlation Between Coca Cola and WisdomTree Managed

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

Diversification Opportunities for Coca Cola and WisdomTree Managed

0.06

Correlation Coefficient

Coca Cola  WisdomTree Managed

Significant diversification

The 3 months correlation between Coca and WisdomTree is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and WisdomTree Managed Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Managed 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 WisdomTree Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Managed has no effect on the direction of Coca Cola i.e., Coca Cola and WisdomTree Managed go up and down completely randomly.

Pair Corralation between Coca Cola and WisdomTree Managed

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 1.62 times more return on investment than WisdomTree Managed. However, Coca Cola is 1.62 times more volatile than WisdomTree Managed Futures. It trades about 0.05 of its potential returns per unit of risk. WisdomTree Managed Futures is currently generating about 0.06 per unit of risk. If you would invest  5,598  in The Coca Cola on November 19, 2024 and sell it today you would earn a total of  1,289  from holding The Coca Cola or generate 23.03% return on investment over 90 days.

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

The Coca Cola  vs.  WisdomTree Managed Futures

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 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in March 2025.

WisdomTree Managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Managed Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, WisdomTree Managed is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coca Cola and WisdomTree Managed

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

The idea behind The Coca Cola and WisdomTree Managed Futures 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.