Correlation Between Coca Cola and CECO Environmental
Can any of the company-specific risk be diversified away by investing in both Coca Cola and CECO Environmental 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 CECO Environmental 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 CECO Environmental Corp, you can compare the effects of market volatilities on Coca Cola and CECO Environmental 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 CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and CECO Environmental.
Diversification Opportunities for Coca Cola and CECO Environmental
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coca and CECO is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental Corp 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 CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of Coca Cola i.e., Coca Cola and CECO Environmental go up and down completely randomly.
Pair Corralation between Coca Cola and CECO Environmental
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.42 times more return on investment than CECO Environmental. However, The Coca Cola is 2.36 times less risky than CECO Environmental. It trades about 0.11 of its potential returns per unit of risk. CECO Environmental Corp is currently generating about -0.16 per unit of risk. If you would invest 6,184 in The Coca Cola on November 3, 2024 and sell it today you would earn a total of 164.00 from holding The Coca Cola or generate 2.65% 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. CECO Environmental Corp
Performance |
| Timeline |
| Coca Cola |
| CECO Environmental Corp |
Coca Cola and CECO Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and CECO Environmental
The main advantage of trading using opposite Coca Cola and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, CECO Environmental 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 CECO Environmental will offset losses from the drop in CECO Environmental's 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 |
| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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