Correlation Between Ford and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Coca Cola Co, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Coca Cola.
Diversification Opportunities for Ford and Coca Cola
Very good diversification
The 3 months correlation between Ford and Coca is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Coca Cola Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Ford 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 Ford Motor 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 has no effect on the direction of Ford i.e., Ford and Coca Cola go up and down completely randomly.
Pair Corralation between Ford and Coca Cola
Taking into account the 90-day investment horizon Ford Motor is expected to generate 2.23 times more return on investment than Coca Cola. However, Ford is 2.23 times more volatile than Coca Cola Co. It trades about 0.19 of its potential returns per unit of risk. Coca Cola Co is currently generating about -0.18 per unit of risk. If you would invest 1,027 in Ford Motor on August 30, 2024 and sell it today you would earn a total of 83.00 from holding Ford Motor or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Coca Cola Co
Performance |
| Timeline |
| Ford Motor |
| Coca Cola |
Ford and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Coca Cola
The main advantage of trading using opposite Ford and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Coca Cola Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Coca Cola vs. Schroder Real Estate | Coca Cola vs. Herald Investment Trust | Coca Cola vs. British American Tobacco | Coca Cola vs. Dunedin Enterprise Investment |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |