Correlation Between Coca Cola and Invesco SP

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

Diversification Opportunities for Coca Cola and Invesco SP

-0.54

Correlation Coefficient

Coca Cola  Invesco SP

Excellent diversification

The 3 months correlation between Coca and Invesco is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Invesco SP MidCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP MidCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP MidCap has no effect on the direction of Coca Cola i.e., Coca Cola and Invesco SP go up and down completely randomly.

Pair Corralation between Coca Cola and Invesco SP

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 3.09 times less return on investment than Invesco SP. But when comparing it to its historical volatility, The Coca Cola is 1.35 times less risky than Invesco SP. It trades about 0.02 of its potential returns per unit of risk. Invesco SP MidCap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,820  in Invesco SP MidCap on September 15, 2024 and sell it today you would earn a total of  773.00  from holding Invesco SP MidCap or generate 7.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

The Coca Cola  vs.  Invesco SP MidCap

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 fragile 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.

Invesco SP MidCap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP MidCap are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical indicators, Invesco SP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Coca Cola and Invesco SP

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

The idea behind The Coca Cola and Invesco SP MidCap 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.