Correlation Between GM and Coca-Cola Consolidated
Can any of the company-specific risk be diversified away by investing in both GM and Coca-Cola Consolidated 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 GM and Coca-Cola Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Coca Cola Consolidated, you can compare the effects of market volatilities on GM and Coca-Cola Consolidated 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 GM with a short position of Coca-Cola Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Coca-Cola Consolidated.
Diversification Opportunities for GM and Coca-Cola Consolidated
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GM and Coca-Cola is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated and GM 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 General Motors are associated (or correlated) with Coca-Cola Consolidated. 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 Consolidated has no effect on the direction of GM i.e., GM and Coca-Cola Consolidated go up and down completely randomly.
Pair Corralation between GM and Coca-Cola Consolidated
Allowing for the 90-day total investment horizon GM is expected to generate 1.02 times less return on investment than Coca-Cola Consolidated. But when comparing it to its historical volatility, General Motors is 1.12 times less risky than Coca-Cola Consolidated. It trades about 0.11 of its potential returns per unit of risk. Coca Cola Consolidated is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 74,227 in Coca Cola Consolidated on September 3, 2024 and sell it today you would earn a total of 48,773 from holding Coca Cola Consolidated or generate 65.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
General Motors vs. Coca Cola Consolidated
Performance |
| Timeline |
| General Motors |
| Coca Cola Consolidated |
GM and Coca-Cola Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Coca-Cola Consolidated
The main advantage of trading using opposite GM and Coca-Cola Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Coca-Cola Consolidated 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 Consolidated will offset losses from the drop in Coca-Cola Consolidated's long position.The idea behind General Motors and Coca Cola Consolidated 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 Consolidated vs. T MOBILE INCDL 00001 | Coca-Cola Consolidated vs. Playtech plc | Coca-Cola Consolidated vs. TRAVEL LEISURE DL 01 | Coca-Cola Consolidated vs. COLUMBIA SPORTSWEAR |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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