Correlation Between Coca Cola and Analog Devices
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on Coca Cola and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Analog Devices.
Diversification Opportunities for Coca Cola and Analog Devices
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Analog is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Coca Cola i.e., Coca Cola and Analog Devices go up and down completely randomly.
Pair Corralation between Coca Cola and Analog Devices
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.64 times more return on investment than Analog Devices. However, The Coca Cola is 1.56 times less risky than Analog Devices. It trades about 0.17 of its potential returns per unit of risk. Analog Devices is currently generating about 0.08 per unit of risk. If you would invest 6,139 in The Coca Cola on September 19, 2024 and sell it today you would earn a total of 201.00 from holding The Coca Cola or generate 3.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Analog Devices
Performance |
| Timeline |
| Coca Cola |
| Analog Devices |
Coca Cola and Analog Devices Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Analog Devices
The main advantage of trading using opposite Coca Cola and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Coca Cola European Partners | Coca Cola vs. Coca Cola Consolidated |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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