Correlation Between Coca Cola and MicroSectors Solactive
Can any of the company-specific risk be diversified away by investing in both Coca Cola and MicroSectors Solactive 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 MicroSectors Solactive 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 MicroSectors Solactive FANG, you can compare the effects of market volatilities on Coca Cola and MicroSectors Solactive 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 MicroSectors Solactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and MicroSectors Solactive.
Diversification Opportunities for Coca Cola and MicroSectors Solactive
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and MicroSectors is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and MicroSectors Solactive FANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Solactive 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 MicroSectors Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Solactive has no effect on the direction of Coca Cola i.e., Coca Cola and MicroSectors Solactive go up and down completely randomly.
Pair Corralation between Coca Cola and MicroSectors Solactive
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.19 times more return on investment than MicroSectors Solactive. However, The Coca Cola is 5.24 times less risky than MicroSectors Solactive. It trades about 0.04 of its potential returns per unit of risk. MicroSectors Solactive FANG is currently generating about -0.09 per unit of risk. If you would invest 5,732 in The Coca Cola on September 1, 2024 and sell it today you would earn a total of 676.00 from holding The Coca Cola or generate 11.79% 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. MicroSectors Solactive FANG
Performance |
| Timeline |
| Coca Cola |
| MicroSectors Solactive |
Coca Cola and MicroSectors Solactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and MicroSectors Solactive
The main advantage of trading using opposite Coca Cola and MicroSectors Solactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, MicroSectors Solactive 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 MicroSectors Solactive will offset losses from the drop in MicroSectors Solactive's long position.| Coca Cola vs. Vita Coco | Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Embotelladora Andina SA | Coca Cola vs. National Beverage Corp |
| MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. MicroSectors Solactive FANG | MicroSectors Solactive vs. MicroSectors FANG Index |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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