Correlation Between Coca Cola and Connecticut Light
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Connecticut Light 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 Connecticut Light 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 The Connecticut Light, you can compare the effects of market volatilities on Coca Cola and Connecticut Light 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 Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Connecticut Light.
Diversification Opportunities for Coca Cola and Connecticut Light
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Coca and Connecticut is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light 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 Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Coca Cola i.e., Coca Cola and Connecticut Light go up and down completely randomly.
Pair Corralation between Coca Cola and Connecticut Light
Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Connecticut Light. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.1 times less risky than Connecticut Light. The stock trades about -0.06 of its potential returns per unit of risk. The The Connecticut Light is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,356 in The Connecticut Light on September 1, 2024 and sell it today you would earn a total of 44.00 from holding The Connecticut Light or generate 0.82% 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. The Connecticut Light
Performance |
| Timeline |
| Coca Cola |
| Connecticut Light |
Coca Cola and Connecticut Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Connecticut Light
The main advantage of trading using opposite Coca Cola and Connecticut Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Connecticut Light 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 Connecticut Light will offset losses from the drop in Connecticut Light's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
| Connecticut Light vs. Southern Company | Connecticut Light vs. Duke Energy | Connecticut Light vs. Duke Energy | Connecticut Light vs. National Grid PLC |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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