Correlation Between Coca Cola and Longvie SA
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Longvie SA 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 Longvie SA 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 Longvie SA, you can compare the effects of market volatilities on Coca Cola and Longvie SA 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 Longvie SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Longvie SA.
Diversification Opportunities for Coca Cola and Longvie SA
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coca and Longvie is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Longvie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longvie SA 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 Longvie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longvie SA has no effect on the direction of Coca Cola i.e., Coca Cola and Longvie SA go up and down completely randomly.
Pair Corralation between Coca Cola and Longvie SA
Assuming the 90 days horizon Coca Cola is expected to generate 1.22 times less return on investment than Longvie SA. But when comparing it to its historical volatility, The Coca Cola is 2.04 times less risky than Longvie SA. It trades about 0.12 of its potential returns per unit of risk. Longvie SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,605 in Longvie SA on September 2, 2024 and sell it today you would earn a total of 2,980 from holding Longvie SA or generate 185.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
The Coca Cola vs. Longvie SA
Performance |
| Timeline |
| Coca Cola |
| Longvie SA |
Coca Cola and Longvie SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Longvie SA
The main advantage of trading using opposite Coca Cola and Longvie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Longvie SA 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 Longvie SA will offset losses from the drop in Longvie SA's long position.| Coca Cola vs. Telecom Argentina | Coca Cola vs. Harmony Gold Mining | Coca Cola vs. Transportadora de Gas | Coca Cola vs. Agrometal SAI |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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