Correlation Between Coca Cola and ALK Abell
Can any of the company-specific risk be diversified away by investing in both Coca Cola and ALK Abell 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 ALK Abell 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 ALK Abell AS, you can compare the effects of market volatilities on Coca Cola and ALK Abell 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 ALK Abell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and ALK Abell.
Diversification Opportunities for Coca Cola and ALK Abell
Very poor diversification
The 3 months correlation between Coca and ALK is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and ALK Abell AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALK Abell AS 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 ALK Abell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALK Abell AS has no effect on the direction of Coca Cola i.e., Coca Cola and ALK Abell go up and down completely randomly.
Pair Corralation between Coca Cola and ALK Abell
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 11.33 times less return on investment than ALK Abell. But when comparing it to its historical volatility, The Coca Cola is 3.9 times less risky than ALK Abell. It trades about 0.01 of its potential returns per unit of risk. ALK Abell AS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,400 in ALK Abell AS on September 19, 2024 and sell it today you would earn a total of 805.00 from holding ALK Abell AS or generate 57.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Coca Cola vs. ALK Abell AS
Performance |
| Timeline |
| Coca Cola |
| ALK Abell AS |
Coca Cola and ALK Abell Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and ALK Abell
The main advantage of trading using opposite Coca Cola and ALK Abell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, ALK Abell 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 ALK Abell will offset losses from the drop in ALK Abell's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Coca Cola European Partners | Coca Cola vs. Coca Cola Consolidated |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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