Correlation Between Coca Cola and National Grid
Can any of the company-specific risk be diversified away by investing in both Coca Cola and National Grid 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 National Grid 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 National Grid plc, you can compare the effects of market volatilities on Coca Cola and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and National Grid.
Diversification Opportunities for Coca Cola and National Grid
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Coca and National is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and National Grid plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid plc 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid plc has no effect on the direction of Coca Cola i.e., Coca Cola and National Grid go up and down completely randomly.
Pair Corralation between Coca Cola and National Grid
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.59 times more return on investment than National Grid. However, The Coca Cola is 1.69 times less risky than National Grid. It trades about 0.38 of its potential returns per unit of risk. National Grid plc is currently generating about 0.0 per unit of risk. If you would invest 6,405 in The Coca Cola on December 1, 2024 and sell it today you would earn a total of 716.00 from holding The Coca Cola or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. National Grid plc
Performance |
| Timeline |
| Coca Cola |
| National Grid plc |
Coca Cola and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and National Grid
The main advantage of trading using opposite Coca Cola and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| Coca Cola vs. Vita Coco | Coca Cola vs. Keurig Dr Pepper | Coca Cola vs. PepsiCo | Coca Cola vs. Coca Cola Femsa SAB |
| National Grid vs. Consolidated Edison | National Grid vs. Entergy | National Grid vs. FirstEnergy | National Grid vs. PPL Corporation |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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