Correlation Between Optima Bank and Coca Cola

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

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

Diversification Opportunities for Optima Bank and Coca Cola

0.82

Correlation Coefficient

Optima Bank  Coca Cola

Very poor diversification

The 3 months correlation between Optima and Coca is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Optima bank SA and Coca Cola HBC AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC and Optima Bank 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 Optima bank SA 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 HBC has no effect on the direction of Optima Bank i.e., Optima Bank and Coca Cola go up and down completely randomly.

Pair Corralation between Optima Bank and Coca Cola

Assuming the 90 days trading horizon Optima Bank is expected to generate 1.15 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Optima bank SA is 1.28 times less risky than Coca Cola. It trades about 0.3 of its potential returns per unit of risk. Coca Cola HBC AG is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  3,288  in Coca Cola HBC AG on December 30, 2024 and sell it today you would earn a total of  918.00  from holding Coca Cola HBC AG or generate 27.92% return on investment over 90 days.

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

Optima bank SA  vs.  Coca Cola HBC AG

Optima bank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Optima bank SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Optima Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola HBC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola HBC AG are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Coca Cola unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Optima Bank and Coca Cola

The main advantage of trading using opposite Optima Bank and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Optima Bank 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 Optima bank SA and Coca Cola HBC AG 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.