Correlation Between Coca Cola and Cars
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Cars 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 Cars 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 Cars Inc, you can compare the effects of market volatilities on Coca Cola and Cars 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 Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Cars.
Diversification Opportunities for Coca Cola and Cars
Very good diversification
The 3 months correlation between Coca and Cars is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc 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 Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of Coca Cola i.e., Coca Cola and Cars go up and down completely randomly.
Pair Corralation between Coca Cola and Cars
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 5.22 times less return on investment than Cars. But when comparing it to its historical volatility, The Coca Cola is 2.85 times less risky than Cars. It trades about 0.02 of its potential returns per unit of risk. Cars Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,453 in Cars Inc on August 28, 2024 and sell it today you would earn a total of 536.00 from holding Cars Inc or generate 36.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Cars Inc
Performance |
| Timeline |
| Coca Cola |
| Cars Inc |
Coca Cola and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Cars
The main advantage of trading using opposite Coca Cola and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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