Correlation Between Coca Cola and Arca Continental
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Arca Continental 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 Arca Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola Consolidated and Arca Continental SAB, you can compare the effects of market volatilities on Coca Cola and Arca Continental 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 Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Arca Continental.
Diversification Opportunities for Coca Cola and Arca Continental
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Coca and Arca is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Consolidated and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Consolidated are associated (or correlated) with Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Coca Cola i.e., Coca Cola and Arca Continental go up and down completely randomly.
Pair Corralation between Coca Cola and Arca Continental
Given the investment horizon of 90 days Coca Cola Consolidated is expected to generate 0.77 times more return on investment than Arca Continental. However, Coca Cola Consolidated is 1.29 times less risky than Arca Continental. It trades about 0.07 of its potential returns per unit of risk. Arca Continental SAB is currently generating about -0.01 per unit of risk. If you would invest 121,088 in Coca Cola Consolidated on November 3, 2024 and sell it today you would earn a total of 15,674 from holding Coca Cola Consolidated or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.4% |
| Values | Daily Returns |
Coca Cola Consolidated vs. Arca Continental SAB
Performance |
| Timeline |
| Coca Cola Consolidated |
| Arca Continental SAB |
Coca Cola and Arca Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Arca Continental
The main advantage of trading using opposite Coca Cola and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental's long position.| Coca Cola vs. The Coca Cola | Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Keurig Dr Pepper |
| Arca Continental vs. The Coca Cola | Arca Continental vs. Monster Beverage Corp | Arca Continental vs. Celsius Holdings | Arca Continental 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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