Correlation Between Coca Cola and Eramet SA
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Eramet SA 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 Eramet SA 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 Eramet SA ADR, you can compare the effects of market volatilities on Coca Cola and Eramet SA 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 Eramet SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Eramet SA.
Diversification Opportunities for Coca Cola and Eramet SA
Poor diversification
The 3 months correlation between Coca and Eramet is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Eramet SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eramet SA ADR 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 Eramet SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eramet SA ADR has no effect on the direction of Coca Cola i.e., Coca Cola and Eramet SA go up and down completely randomly.
Pair Corralation between Coca Cola and Eramet SA
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.26 times more return on investment than Eramet SA. However, The Coca Cola is 3.78 times less risky than Eramet SA. It trades about 0.04 of its potential returns per unit of risk. Eramet SA ADR is currently generating about -0.17 per unit of risk. If you would invest 6,155 in The Coca Cola on September 1, 2024 and sell it today you would earn a total of 253.00 from holding The Coca Cola or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Eramet SA ADR
Performance |
| Timeline |
| Coca Cola |
| Eramet SA ADR |
Coca Cola and Eramet SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Eramet SA
The main advantage of trading using opposite Coca Cola and Eramet SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Eramet SA 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 Eramet SA will offset losses from the drop in Eramet SA's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
| Eramet SA vs. IGO Limited | Eramet SA vs. Nickel Mines Limited | Eramet SA vs. IGO Limited | Eramet SA vs. Edison Cobalt Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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