Correlation Between Coca Cola and American Express
Can any of the company-specific risk be diversified away by investing in both Coca Cola and American Express 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 American Express into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and American Express Co, you can compare the effects of market volatilities on Coca Cola and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and American Express.
Diversification Opportunities for Coca Cola and American Express
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Coca and American is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and American Express Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 The Coca Cola are associated (or correlated) with American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Coca Cola i.e., Coca Cola and American Express go up and down completely randomly.
Pair Corralation between Coca Cola and American Express
Assuming the 90 days horizon Coca Cola is expected to generate 2.15 times less return on investment than American Express. But when comparing it to its historical volatility, The Coca Cola is 1.16 times less risky than American Express. It trades about 0.13 of its potential returns per unit of risk. American Express Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,327,495 in American Express Co on November 2, 2024 and sell it today you would earn a total of 197,505 from holding American Express Co or generate 8.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. American Express Co
Performance |
| Timeline |
| Coca Cola |
| American Express |
Coca Cola and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and American Express
The main advantage of trading using opposite Coca Cola and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.| Coca Cola vs. Grimoldi SA | Coca Cola vs. Transportadora de Gas | Coca Cola vs. Alphabet Inc Class A CEDEAR | Coca Cola vs. International Business Machines |
| American Express vs. International Business Machines | American Express vs. Transportadora de Gas | American Express vs. Agrometal SAI | American Express vs. Grimoldi SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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