Correlation Between Diageo PLC and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Diageo PLC 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 Diageo PLC and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo PLC ADR and Coca Cola Femsa SAB, you can compare the effects of market volatilities on Diageo PLC 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 Diageo PLC with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo PLC and Coca Cola.
Diversification Opportunities for Diageo PLC and Coca Cola
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Diageo and Coca is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Diageo PLC ADR and Coca Cola Femsa SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Femsa and Diageo PLC 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 Diageo PLC ADR 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 Femsa has no effect on the direction of Diageo PLC i.e., Diageo PLC and Coca Cola go up and down completely randomly.
Pair Corralation between Diageo PLC and Coca Cola
Considering the 90-day investment horizon Diageo PLC ADR is expected to under-perform the Coca Cola. In addition to that, Diageo PLC is 1.06 times more volatile than Coca Cola Femsa SAB. It trades about -0.37 of its total potential returns per unit of risk. Coca Cola Femsa SAB is currently generating about -0.26 per unit of volatility. If you would invest 8,507 in Coca Cola Femsa SAB on August 24, 2024 and sell it today you would lose (601.00) from holding Coca Cola Femsa SAB or give up 7.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo PLC ADR vs. Coca Cola Femsa SAB
Performance |
| Timeline |
| Diageo PLC ADR |
| Coca Cola Femsa |
Diageo PLC and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo PLC and Coca Cola
The main advantage of trading using opposite Diageo PLC and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo PLC 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.| Diageo PLC vs. Brown Forman | Diageo PLC vs. MGP Ingredients | Diageo PLC vs. Duckhorn Portfolio | Diageo PLC vs. Brown Forman |
| Coca Cola vs. The Coca Cola | Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Keurig Dr Pepper |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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