Correlation Between Perceptive Capital and Coca Cola

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

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

Diversification Opportunities for Perceptive Capital and Coca Cola

0.93

Correlation Coefficient

Perceptive Capital  Coca Cola

Almost no diversification

The 3 months correlation between Perceptive and Coca is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Perceptive Capital Solutions and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Perceptive Capital 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 Perceptive Capital Solutions 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 Perceptive Capital i.e., Perceptive Capital and Coca Cola go up and down completely randomly.

Pair Corralation between Perceptive Capital and Coca Cola

Given the investment horizon of 90 days Perceptive Capital is expected to generate 8.24 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Perceptive Capital Solutions is 6.59 times less risky than Coca Cola. It trades about 0.14 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,158  in The Coca Cola on December 28, 2024 and sell it today you would earn a total of  879.00  from holding The Coca Cola or generate 14.27% return on investment over 90 days.

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

Perceptive Capital Solutions  vs.  The Coca Cola

Perceptive Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perceptive Capital Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Perceptive Capital 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

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Perceptive Capital and Coca Cola

The main advantage of trading using opposite Perceptive Capital and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perceptive Capital 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 Perceptive Capital Solutions 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.