Correlation Between Coca Cola and Indutrade
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Indutrade 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 Coca Cola and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola Co and Indutrade AB, you can compare the effects of market volatilities on Coca Cola and Indutrade 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 Coca Cola with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Indutrade.
Diversification Opportunities for Coca Cola and Indutrade
Very poor diversification
The 3 months correlation between Coca and Indutrade is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Co and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and Coca Cola 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 Coca Cola Co are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of Coca Cola i.e., Coca Cola and Indutrade go up and down completely randomly.
Pair Corralation between Coca Cola and Indutrade
Assuming the 90 days trading horizon Coca Cola Co is expected to generate 0.58 times more return on investment than Indutrade. However, Coca Cola Co is 1.73 times less risky than Indutrade. It trades about 0.04 of its potential returns per unit of risk. Indutrade AB is currently generating about 0.02 per unit of risk. If you would invest 6,137 in Coca Cola Co on September 1, 2024 and sell it today you would earn a total of 283.00 from holding Coca Cola Co or generate 4.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.23% |
| Values | Daily Returns |
Coca Cola Co vs. Indutrade AB
Performance |
| Timeline |
| Coca Cola |
| Indutrade AB |
Coca Cola and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Indutrade
The main advantage of trading using opposite Coca Cola and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| Coca Cola vs. Thor Mining PLC | Coca Cola vs. Dentsply Sirona | Coca Cola vs. Zanaga Iron Ore | Coca Cola vs. Ironveld Plc |
| Indutrade vs. Uniper SE | Indutrade vs. Mulberry Group PLC | Indutrade vs. London Security Plc | Indutrade vs. Triad Group PLC |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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