Correlation Between TESCO PLC and Coca Cola

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

By analyzing existing cross correlation between TESCO PLC LS 0633333 and Coca Cola FEMSA SAB, you can compare the effects of market volatilities on TESCO PLC 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 TESCO PLC with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of TESCO PLC and Coca Cola.

Diversification Opportunities for TESCO PLC and Coca Cola

-0.07

Correlation Coefficient

TESCO PLC  Coca Cola

Good diversification

The 3 months correlation between TESCO and Coca is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding TESCO PLC LS 0633333 and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA and TESCO PLC 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 TESCO PLC LS 0633333 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 FEMSA has no effect on the direction of TESCO PLC i.e., TESCO PLC and Coca Cola go up and down completely randomly.

Pair Corralation between TESCO PLC and Coca Cola

Assuming the 90 days trading horizon TESCO PLC LS 0633333 is expected to under-perform the Coca Cola. But the stock apears to be less risky and, when comparing its historical volatility, TESCO PLC LS 0633333 is 1.78 times less risky than Coca Cola. The stock trades about -0.07 of its potential returns per unit of risk. The Coca Cola FEMSA SAB is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  770.00  in Coca Cola FEMSA SAB on December 29, 2024 and sell it today you would earn a total of  55.00  from holding Coca Cola FEMSA SAB or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

TESCO PLC LS 0633333  vs.  Coca Cola FEMSA SAB

TESCO PLC LS

Risk-Adjusted Performance

Very Weak

Over the last 90 days TESCO PLC LS 0633333 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Coca Cola FEMSA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with TESCO PLC and Coca Cola

The main advantage of trading using opposite TESCO PLC and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TESCO PLC 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 TESCO PLC LS 0633333 and Coca Cola FEMSA SAB 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.

Check out your portfolio center.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.