Correlation Between NorAm Drilling and Coca-Cola FEMSA

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

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

Diversification Opportunities for NorAm Drilling and Coca-Cola FEMSA

-0.04

Correlation Coefficient

NorAm Drilling  Coca-Cola FEMSA

Good diversification

The 3 months correlation between NorAm and Coca-Cola is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS 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 NorAm Drilling 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 NorAm Drilling AS are associated (or correlated) with Coca-Cola FEMSA. 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 NorAm Drilling i.e., NorAm Drilling and Coca-Cola FEMSA go up and down completely randomly.

Pair Corralation between NorAm Drilling and Coca-Cola FEMSA

Assuming the 90 days horizon NorAm Drilling is expected to generate 2.08 times less return on investment than Coca-Cola FEMSA. In addition to that, NorAm Drilling is 1.67 times more volatile than Coca Cola FEMSA SAB. It trades about 0.02 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.08 per unit of volatility. If you would invest  725.00  in Coca Cola FEMSA SAB on November 29, 2024 and sell it today you would earn a total of  100.00  from holding Coca Cola FEMSA SAB or generate 13.79% return on investment over 90 days.

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

NorAm Drilling AS  vs.  Coca Cola FEMSA SAB

NorAm Drilling AS

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NorAm Drilling AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NorAm Drilling may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Coca Cola FEMSA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coca-Cola FEMSA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NorAm Drilling and Coca-Cola FEMSA

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

The idea behind NorAm Drilling AS 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.