Correlation Between Coca Cola and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Coca Cola and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Northern Lights.
Diversification Opportunities for Coca Cola and Northern Lights
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and Northern is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Coca Cola i.e., Coca Cola and Northern Lights go up and down completely randomly.
Pair Corralation between Coca Cola and Northern Lights
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 4.01 times less return on investment than Northern Lights. But when comparing it to its historical volatility, The Coca Cola is 1.21 times less risky than Northern Lights. It trades about 0.02 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,009 in Northern Lights on August 30, 2024 and sell it today you would earn a total of 1,213 from holding Northern Lights or generate 40.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Northern Lights
Performance |
| Timeline |
| Coca Cola |
| Northern Lights |
Coca Cola and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Northern Lights
The main advantage of trading using opposite Coca Cola and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola European Partners | Coca Cola vs. Capital Income Builder | Coca Cola vs. Direxion Daily FTSE |
| Northern Lights vs. Inspire Global Hope | Northern Lights vs. Inspire SmallMid Cap | Northern Lights vs. Inspire International ESG | Northern Lights vs. Northern Lights |
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 CEOs Directory module to screen CEOs from public companies around the world.
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