Correlation Between MRC Global and Coca Cola

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

By analyzing existing cross correlation between MRC Global and The Coca Cola, you can compare the effects of market volatilities on MRC Global and Coca Cola 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 MRC Global with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRC Global and Coca Cola.

Diversification Opportunities for MRC Global and Coca Cola

-0.51

Correlation Coefficient

MRC Global  Coca Cola

Excellent diversification

The 3 months correlation between MRC and Coca is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding MRC Global and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and MRC Global 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 MRC Global are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of MRC Global i.e., MRC Global and Coca Cola go up and down completely randomly.

Pair Corralation between MRC Global and Coca Cola

Considering the 90-day investment horizon MRC Global is expected to under-perform the Coca Cola. In addition to that, MRC Global is 2.1 times more volatile than The Coca Cola. It trades about -0.11 of its total potential returns per unit of risk. The Coca Cola is currently generating about -0.07 per unit of volatility. If you would invest  6,322  in The Coca Cola on October 7, 2024 and sell it today you would lose (147.00) from holding The Coca Cola or give up 2.33% of portfolio value over 90 days.

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

MRC Global  vs.  The Coca Cola

MRC Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MRC Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, MRC Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with MRC Global and Coca Cola

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

The idea behind MRC Global and The Coca Cola 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.