Correlation Between Profile Systems and Coca Cola

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

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

Diversification Opportunities for Profile Systems and Coca Cola

-0.74

Correlation Coefficient

Profile Systems  Coca Cola

Pay attention - limited upside

The 3 months correlation between Profile and Coca is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Profile Systems Software 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 Profile Systems 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 Profile Systems Software 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 Profile Systems i.e., Profile Systems and Coca Cola go up and down completely randomly.

Pair Corralation between Profile Systems and Coca Cola

Assuming the 90 days trading horizon Profile Systems is expected to generate 63.94 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Profile Systems Software is 1.34 times less risky than Coca Cola. It trades about 0.01 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Profile Systems Software  vs.  Coca Cola HBC AG

Profile Systems Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Profile Systems Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Profile Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 weak 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 Profile Systems and Coca Cola

The main advantage of trading using opposite Profile Systems and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Profile Systems 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 Profile Systems Software 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.