Correlation Between Coca Cola and Western Magnesium
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Western Magnesium 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 Western Magnesium 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 Western Magnesium, you can compare the effects of market volatilities on Coca Cola and Western Magnesium 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 Western Magnesium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Western Magnesium.
Diversification Opportunities for Coca Cola and Western Magnesium
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and Western is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Western Magnesium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Magnesium 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 Western Magnesium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Magnesium has no effect on the direction of Coca Cola i.e., Coca Cola and Western Magnesium go up and down completely randomly.
Pair Corralation between Coca Cola and Western Magnesium
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.09 times more return on investment than Western Magnesium. However, The Coca Cola is 10.63 times less risky than Western Magnesium. It trades about 0.03 of its potential returns per unit of risk. Western Magnesium is currently generating about -0.09 per unit of risk. If you would invest 6,254 in The Coca Cola on September 2, 2024 and sell it today you would earn a total of 154.00 from holding The Coca Cola or generate 2.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
The Coca Cola vs. Western Magnesium
Performance |
| Timeline |
| Coca Cola |
| Western Magnesium |
Coca Cola and Western Magnesium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Western Magnesium
The main advantage of trading using opposite Coca Cola and Western Magnesium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Western Magnesium 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 Western Magnesium will offset losses from the drop in Western Magnesium'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 |
| Western Magnesium vs. ATT Inc | Western Magnesium vs. Merck Company | Western Magnesium vs. Walt Disney | Western Magnesium vs. Caterpillar |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |