Correlation Between Coca Cola and Avvax

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and Avvax 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 Avvax 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 Avvax, you can compare the effects of market volatilities on Coca Cola and Avvax 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 Avvax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Avvax.

Diversification Opportunities for Coca Cola and Avvax

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Coca and Avvax is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Avvax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avvax 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 Avvax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avvax has no effect on the direction of Coca Cola i.e., Coca Cola and Avvax go up and down completely randomly.

Pair Corralation between Coca Cola and Avvax

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 2.13 times more return on investment than Avvax. However, Coca Cola is 2.13 times more volatile than Avvax. It trades about 0.09 of its potential returns per unit of risk. Avvax is currently generating about 0.17 per unit of risk. If you would invest  6,272  in The Coca Cola on September 13, 2024 and sell it today you would earn a total of  101.50  from holding The Coca Cola or generate 1.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Coca Cola  vs.  Avvax

 Performance 
       Timeline  
Coca Cola 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Avvax 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Avvax are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Avvax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola and Avvax Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Avvax

The main advantage of trading using opposite Coca Cola and Avvax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Avvax 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 Avvax will offset losses from the drop in Avvax's long position.
The idea behind The Coca Cola and Avvax pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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