Correlation Between Analog Devices and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Analog Devices 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 Analog Devices and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and The Coca Cola, you can compare the effects of market volatilities on Analog Devices 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 Analog Devices with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Coca Cola.
Diversification Opportunities for Analog Devices and Coca Cola
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Analog and Coca is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Analog Devices 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 Analog Devices 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 has no effect on the direction of Analog Devices i.e., Analog Devices and Coca Cola go up and down completely randomly.
Pair Corralation between Analog Devices and Coca Cola
Considering the 90-day investment horizon Analog Devices is expected to generate 1.27 times less return on investment than Coca Cola. In addition to that, Analog Devices is 1.56 times more volatile than The Coca Cola. It trades about 0.08 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.17 per unit of volatility. If you would invest 6,139 in The Coca Cola on September 19, 2024 and sell it today you would earn a total of 201.00 from holding The Coca Cola or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. The Coca Cola
Performance |
| Timeline |
| Analog Devices |
| Coca Cola |
Analog Devices and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and Coca Cola
The main advantage of trading using opposite Analog Devices and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices and The Coca Cola 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.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Coca Cola European Partners | Coca Cola vs. Coca Cola Consolidated |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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