Correlation Between Coca Cola and MCF Energy
Can any of the company-specific risk be diversified away by investing in both Coca Cola and MCF Energy 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 MCF Energy 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 MCF Energy, you can compare the effects of market volatilities on Coca Cola and MCF Energy 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 MCF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and MCF Energy.
Diversification Opportunities for Coca Cola and MCF Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and MCF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and MCF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCF Energy 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 MCF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCF Energy has no effect on the direction of Coca Cola i.e., Coca Cola and MCF Energy go up and down completely randomly.
Pair Corralation between Coca Cola and MCF Energy
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.08 times more return on investment than MCF Energy. However, The Coca Cola is 12.5 times less risky than MCF Energy. It trades about -0.04 of its potential returns per unit of risk. MCF Energy is currently generating about -0.25 per unit of risk. If you would invest 6,462 in The Coca Cola on September 3, 2024 and sell it today you would lose (54.00) from holding The Coca Cola or give up 0.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. MCF Energy
Performance |
| Timeline |
| Coca Cola |
| MCF Energy |
Coca Cola and MCF Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and MCF Energy
The main advantage of trading using opposite Coca Cola and MCF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, MCF Energy 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 MCF Energy will offset losses from the drop in MCF Energy'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 |
| MCF Energy vs. Apple Inc | MCF Energy vs. Microsoft | MCF Energy vs. Amazon Inc | MCF Energy vs. Alphabet Inc Class C |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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