Correlation Between Coca Cola and Hill Street
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Hill Street 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 Hill Street 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 Hill Street Beverage, you can compare the effects of market volatilities on Coca Cola and Hill Street 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 Hill Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Hill Street.
Diversification Opportunities for Coca Cola and Hill Street
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Hill is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Hill Street Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hill Street Beverage 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 Hill Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hill Street Beverage has no effect on the direction of Coca Cola i.e., Coca Cola and Hill Street go up and down completely randomly.
Pair Corralation between Coca Cola and Hill Street
Given the investment horizon of 90 days Coca Cola is expected to generate 7.5 times less return on investment than Hill Street. But when comparing it to its historical volatility, Coca Cola European Partners is 5.45 times less risky than Hill Street. It trades about 0.1 of its potential returns per unit of risk. Hill Street Beverage is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Hill Street Beverage on August 28, 2024 and sell it today you would earn a total of 3.00 from holding Hill Street Beverage or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coca Cola European Partners vs. Hill Street Beverage
Performance |
| Timeline |
| Coca Cola European |
| Hill Street Beverage |
Coca Cola and Hill Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Hill Street
The main advantage of trading using opposite Coca Cola and Hill Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Hill Street 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 Hill Street will offset losses from the drop in Hill Street'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 |
| Hill Street vs. Barfresh Food Group | Hill Street vs. Fbec Worldwide | Hill Street vs. Flow Beverage Corp | Hill Street vs. Eq Energy Drink |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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