Correlation Between Coca Cola and Arca Continental
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Arca Continental 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 Arca Continental 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 Arca Continental SAB, you can compare the effects of market volatilities on Coca Cola and Arca Continental 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 Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Arca Continental.
Diversification Opportunities for Coca Cola and Arca Continental
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and Arca is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of Coca Cola i.e., Coca Cola and Arca Continental go up and down completely randomly.
Pair Corralation between Coca Cola and Arca Continental
Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Arca Continental. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 3.06 times less risky than Arca Continental. The stock trades about -0.08 of its potential returns per unit of risk. The Arca Continental SAB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 854.00 in Arca Continental SAB on September 3, 2024 and sell it today you would lose (12.00) from holding Arca Continental SAB or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Arca Continental SAB
Performance |
| Timeline |
| Coca Cola |
| Arca Continental SAB |
Coca Cola and Arca Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Arca Continental
The main advantage of trading using opposite Coca Cola and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental'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 |
| Arca Continental vs. The Coca Cola | Arca Continental vs. Monster Beverage Corp | Arca Continental vs. Celsius Holdings | Arca Continental vs. Coca Cola Consolidated |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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