Correlation Between Coca Cola and Western Copper
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Western Copper 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 Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola HBC and Western Copper and, you can compare the effects of market volatilities on Coca Cola and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Western Copper.
Diversification Opportunities for Coca Cola and Western Copper
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coca and Western is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola HBC and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 HBC are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Coca Cola i.e., Coca Cola and Western Copper go up and down completely randomly.
Pair Corralation between Coca Cola and Western Copper
Assuming the 90 days horizon Coca Cola HBC is expected to generate 0.5 times more return on investment than Western Copper. However, Coca Cola HBC is 2.02 times less risky than Western Copper. It trades about 0.08 of its potential returns per unit of risk. Western Copper and is currently generating about -0.02 per unit of risk. If you would invest 2,098 in Coca Cola HBC on August 31, 2024 and sell it today you would earn a total of 1,334 from holding Coca Cola HBC or generate 63.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Coca Cola HBC vs. Western Copper and
Performance |
| Timeline |
| Coca Cola HBC |
| Western Copper |
Coca Cola and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Western Copper
The main advantage of trading using opposite Coca Cola and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.| Coca Cola vs. Western Copper and | Coca Cola vs. SERI INDUSTRIAL EO | Coca Cola vs. Jacquet Metal Service | Coca Cola vs. Tencent Music Entertainment |
| Western Copper vs. MTI WIRELESS EDGE | Western Copper vs. Playa Hotels Resorts | Western Copper vs. Playtech plc | Western Copper vs. INTERSHOP Communications Aktiengesellschaft |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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