Correlation Between Vale SA and Coca Cola

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

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

Diversification Opportunities for Vale SA and Coca Cola

0.0

Correlation Coefficient

Vale SA  Coca Cola

Pay attention - limited upside

The 3 months correlation between Vale and Coca is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Coca Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola European and Vale SA 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 Vale SA 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 European has no effect on the direction of Vale SA i.e., Vale SA and Coca Cola go up and down completely randomly.

Pair Corralation between Vale SA and Coca Cola

If you would invest  847.00  in Vale SA on December 27, 2024 and sell it today you would earn a total of  108.00  from holding Vale SA or generate 12.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vale SA  vs.  Coca Cola European Partners

Vale SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Vale SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola European

Risk-Adjusted Performance

OK

Over the last 90 days Coca Cola European Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vale SA and Coca Cola

The main advantage of trading using opposite Vale SA and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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 Vale SA and Coca Cola European Partners 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.