Correlation Between Coca Cola and Hiru
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Hiru 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 Hiru into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola European Partners and Hiru Corporation, you can compare the effects of market volatilities on Coca Cola and Hiru 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 Hiru. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Hiru.
Diversification Opportunities for Coca Cola and Hiru
Poor diversification
The 3 months correlation between Coca and Hiru is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Hiru Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiru 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 European Partners are associated (or correlated) with Hiru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiru has no effect on the direction of Coca Cola i.e., Coca Cola and Hiru go up and down completely randomly.
Pair Corralation between Coca Cola and Hiru
Given the investment horizon of 90 days Coca Cola is expected to generate 36.13 times less return on investment than Hiru. But when comparing it to its historical volatility, Coca Cola European Partners is 17.42 times less risky than Hiru. It trades about 0.06 of its potential returns per unit of risk. Hiru Corporation is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.06 in Hiru Corporation on August 31, 2024 and sell it today you would earn a total of 0.09 from holding Hiru Corporation or generate 150.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Coca Cola European Partners vs. Hiru Corp.
Performance |
| Timeline |
| Coca Cola European |
| Hiru |
Coca Cola and Hiru Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Hiru
The main advantage of trading using opposite Coca Cola and Hiru positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Hiru 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 Hiru will offset losses from the drop in Hiru's long position.| Coca Cola vs. Vita Coco | Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Embotelladora Andina SA | Coca Cola vs. National Beverage Corp |
| Hiru vs. Indo Global Exchange | Hiru vs. Genesis Electronics Group | Hiru vs. Protext Mobility | Hiru vs. TonnerOne World Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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