Correlation Between Coca Cola and Megacable Holdings

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Megacable Holdings 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 Megacable Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coca Cola FEMSA SAB and Megacable Holdings S, you can compare the effects of market volatilities on Coca Cola and Megacable Holdings 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 Megacable Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Megacable Holdings.

Diversification Opportunities for Coca Cola and Megacable Holdings

0.54

Correlation Coefficient

Coca Cola  Megacable Holdings

Very weak diversification

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

Pair Corralation between Coca Cola and Megacable Holdings

Assuming the 90 days trading horizon Coca Cola FEMSA SAB is expected to generate 0.83 times more return on investment than Megacable Holdings. However, Coca Cola FEMSA SAB is 1.21 times less risky than Megacable Holdings. It trades about 0.06 of its potential returns per unit of risk. Megacable Holdings S is currently generating about -0.1 per unit of risk. If you would invest  14,394  in Coca Cola FEMSA SAB on September 30, 2024 and sell it today you would earn a total of  1,561  from holding Coca Cola FEMSA SAB or generate 10.84% return on investment over 90 days.

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

Coca Cola FEMSA SAB  vs.  Megacable Holdings S

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Megacable Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Megacable Holdings S has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Coca Cola and Megacable Holdings

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

The idea behind Coca Cola FEMSA SAB and Megacable Holdings S 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 Transaction History module to view history of all your transactions and understand their impact on performance.