Correlation Between Coca Cola and IPG Photonics
Can any of the company-specific risk be diversified away by investing in both Coca Cola and IPG Photonics 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 IPG Photonics 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 IPG Photonics, you can compare the effects of market volatilities on Coca Cola and IPG Photonics 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 IPG Photonics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and IPG Photonics.
Diversification Opportunities for Coca Cola and IPG Photonics
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and IPG is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and IPG Photonics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IPG Photonics 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 IPG Photonics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IPG Photonics has no effect on the direction of Coca Cola i.e., Coca Cola and IPG Photonics go up and down completely randomly.
Pair Corralation between Coca Cola and IPG Photonics
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.36 times more return on investment than IPG Photonics. However, The Coca Cola is 2.79 times less risky than IPG Photonics. It trades about 0.02 of its potential returns per unit of risk. IPG Photonics is currently generating about 0.0 per unit of risk. If you would invest 6,016 in The Coca Cola on August 24, 2024 and sell it today you would earn a total of 376.00 from holding The Coca Cola or generate 6.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. IPG Photonics
Performance |
| Timeline |
| Coca Cola |
| IPG Photonics |
Coca Cola and IPG Photonics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and IPG Photonics
The main advantage of trading using opposite Coca Cola and IPG Photonics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, IPG Photonics 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 IPG Photonics will offset losses from the drop in IPG Photonics' long position.| Coca Cola vs. Keurig Dr Pepper | Coca Cola vs. Eshallgo Class A | Coca Cola vs. Amtech Systems | Coca Cola vs. Gold Fields Ltd |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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