Correlation Between Coca Cola and Simplify Exchange
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Simplify Exchange 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 Simplify Exchange 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 Simplify Exchange Traded, you can compare the effects of market volatilities on Coca Cola and Simplify Exchange 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 Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Simplify Exchange.
Diversification Opportunities for Coca Cola and Simplify Exchange
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and Simplify is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded 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 Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of Coca Cola i.e., Coca Cola and Simplify Exchange go up and down completely randomly.
Pair Corralation between Coca Cola and Simplify Exchange
Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Simplify Exchange. In addition to that, Coca Cola is 3.62 times more volatile than Simplify Exchange Traded. It trades about -0.25 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about -0.03 per unit of volatility. If you would invest 5,026 in Simplify Exchange Traded on August 25, 2024 and sell it today you would lose (10.00) from holding Simplify Exchange Traded or give up 0.2% 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. Simplify Exchange Traded
Performance |
| Timeline |
| Coca Cola |
| Simplify Exchange Traded |
Coca Cola and Simplify Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Simplify Exchange
The main advantage of trading using opposite Coca Cola and Simplify Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Simplify Exchange 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 Simplify Exchange will offset losses from the drop in Simplify Exchange's long position.The idea behind The Coca Cola and Simplify Exchange Traded pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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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