Correlation Between Western Digital and Coca Cola

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

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

Diversification Opportunities for Western Digital and Coca Cola

-0.77

Correlation Coefficient

Western Digital  Coca Cola

Pay attention - limited upside

The 3 months correlation between Western and Coca is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital 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 Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and Coca Cola go up and down completely randomly.

Pair Corralation between Western Digital and Coca Cola

Assuming the 90 days trading horizon Western Digital is expected to under-perform the Coca Cola. In addition to that, Western Digital is 2.27 times more volatile than Coca Cola FEMSA SAB. It trades about -0.15 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.15 per unit of volatility. If you would invest  15,974  in Coca Cola FEMSA SAB on December 27, 2024 and sell it today you would earn a total of  2,611  from holding Coca Cola FEMSA SAB or generate 16.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Western Digital  vs.  Coca Cola FEMSA SAB

Western Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Coca Cola FEMSA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Coca Cola sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Digital and Coca Cola

The main advantage of trading using opposite Western Digital and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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 Western Digital 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.