Correlation Between Coca Cola and Northern Institutional
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Northern Institutional 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 Institutional 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 Institutional Funds, you can compare the effects of market volatilities on Coca Cola and Northern Institutional 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 Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Northern Institutional.
Diversification Opportunities for Coca Cola and Northern Institutional
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and Northern is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Northern Institutional Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Institutional 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 Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Institutional has no effect on the direction of Coca Cola i.e., Coca Cola and Northern Institutional go up and down completely randomly.
Pair Corralation between Coca Cola and Northern Institutional
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.68 times less return on investment than Northern Institutional. But when comparing it to its historical volatility, The Coca Cola is 1.51 times less risky than Northern Institutional. It trades about 0.02 of its potential returns per unit of risk. Northern Institutional Funds is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Northern Institutional Funds on August 27, 2024 and sell it today you would earn a total of 9.00 from holding Northern Institutional Funds or generate 9.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.22% |
| Values | Daily Returns |
The Coca Cola vs. Northern Institutional Funds
Performance |
| Timeline |
| Coca Cola |
| Northern Institutional |
Coca Cola and Northern Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Northern Institutional
The main advantage of trading using opposite Coca Cola and Northern Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Northern Institutional 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 Institutional will offset losses from the drop in Northern Institutional's long position.The idea behind The Coca Cola and Northern Institutional Funds 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.| Northern Institutional vs. Vanguard Total Stock | Northern Institutional vs. Vanguard 500 Index | Northern Institutional vs. Vanguard Total Stock | Northern Institutional vs. Vanguard Total Stock |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |