Correlation Between Home Depot and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Home Depot 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 Home Depot and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Depot and Coca Cola HBC, you can compare the effects of market volatilities on Home Depot 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 Home Depot with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Depot and Coca Cola.
Diversification Opportunities for Home Depot and Coca Cola
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Home and Coca is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Home Depot and Coca Cola HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC and Home Depot 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 Home Depot 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 HBC has no effect on the direction of Home Depot i.e., Home Depot and Coca Cola go up and down completely randomly.
Pair Corralation between Home Depot and Coca Cola
Assuming the 90 days trading horizon Home Depot is expected to generate 2.03 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Home Depot is 2.89 times less risky than Coca Cola. It trades about 0.06 of its potential returns per unit of risk. Coca Cola HBC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 269,400 in Coca Cola HBC on September 3, 2024 and sell it today you would earn a total of 13,000 from holding Coca Cola HBC or generate 4.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Home Depot vs. Coca Cola HBC
Performance |
| Timeline |
| Home Depot |
| Coca Cola HBC |
Home Depot and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Depot and Coca Cola
The main advantage of trading using opposite Home Depot and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Depot 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.| Home Depot vs. Toyota Motor Corp | Home Depot vs. SoftBank Group Corp | Home Depot vs. OTP Bank Nyrt | Home Depot vs. Las Vegas Sands |
| Coca Cola vs. Various Eateries PLC | Coca Cola vs. Eastman Chemical Co | Coca Cola vs. Lowland Investment Co | Coca Cola vs. Vitec Software Group |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |