Correlation Between Coca Cola and Volvo AB
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Volvo AB 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 Volvo AB 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 Volvo AB Series, you can compare the effects of market volatilities on Coca Cola and Volvo AB 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 Volvo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Volvo AB.
Diversification Opportunities for Coca Cola and Volvo AB
Excellent diversification
The 3 months correlation between Coca and Volvo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Co and Volvo AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB Series 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 Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB Series has no effect on the direction of Coca Cola i.e., Coca Cola and Volvo AB go up and down completely randomly.
Pair Corralation between Coca Cola and Volvo AB
Assuming the 90 days trading horizon Coca Cola is expected to generate 1.4 times less return on investment than Volvo AB. But when comparing it to its historical volatility, Coca Cola Co is 1.43 times less risky than Volvo AB. It trades about 0.05 of its potential returns per unit of risk. Volvo AB Series is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 28,195 in Volvo AB Series on September 13, 2024 and sell it today you would earn a total of 335.00 from holding Volvo AB Series or generate 1.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Coca Cola Co vs. Volvo AB Series
Performance |
| Timeline |
| Coca Cola |
| Volvo AB Series |
Coca Cola and Volvo AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Volvo AB
The main advantage of trading using opposite Coca Cola and Volvo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Volvo AB 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 Volvo AB will offset losses from the drop in Volvo AB's long position.| Coca Cola vs. Zoom Video Communications | Coca Cola vs. Gamma Communications PLC | Coca Cola vs. Norman Broadbent Plc | Coca Cola vs. Vulcan Materials Co |
| Volvo AB vs. Alfa Financial Software | Volvo AB vs. Hochschild Mining plc | Volvo AB vs. Anglesey Mining | Volvo AB vs. Sunny Optical Technology |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |