Correlation Between Coca Cola and Airtel Africa
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Airtel Africa 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 Airtel Africa 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 Airtel Africa Plc, you can compare the effects of market volatilities on Coca Cola and Airtel Africa 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 Airtel Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Airtel Africa.
Diversification Opportunities for Coca Cola and Airtel Africa
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Airtel is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Airtel Africa Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airtel Africa Plc 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 Airtel Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airtel Africa Plc has no effect on the direction of Coca Cola i.e., Coca Cola and Airtel Africa go up and down completely randomly.
Pair Corralation between Coca Cola and Airtel Africa
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.18 times more return on investment than Airtel Africa. However, The Coca Cola is 5.5 times less risky than Airtel Africa. It trades about -0.06 of its potential returns per unit of risk. Airtel Africa Plc is currently generating about -0.05 per unit of risk. If you would invest 6,482 in The Coca Cola on September 1, 2024 and sell it today you would lose (74.00) from holding The Coca Cola or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Airtel Africa Plc
Performance |
| Timeline |
| Coca Cola |
| Airtel Africa Plc |
Coca Cola and Airtel Africa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Airtel Africa
The main advantage of trading using opposite Coca Cola and Airtel Africa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Airtel Africa 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 Airtel Africa will offset losses from the drop in Airtel Africa's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Embotelladora Andina SA | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
| Airtel Africa vs. BCE Inc | Airtel Africa vs. Axiologix | Airtel Africa vs. Advanced Info Service | Airtel Africa vs. American Nortel Communications |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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