Correlation Between Coca Cola and Nihon Kohden

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and Nihon Kohden 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 Nihon Kohden 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 Nihon Kohden, you can compare the effects of market volatilities on Coca Cola and Nihon Kohden 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 Nihon Kohden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Nihon Kohden.

Diversification Opportunities for Coca Cola and Nihon Kohden

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Coca and Nihon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Nihon Kohden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nihon Kohden 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 Nihon Kohden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nihon Kohden has no effect on the direction of Coca Cola i.e., Coca Cola and Nihon Kohden go up and down completely randomly.

Pair Corralation between Coca Cola and Nihon Kohden

If you would invest  6,288  in The Coca Cola on September 12, 2024 and sell it today you would earn a total of  3.00  from holding The Coca Cola or generate 0.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

The Coca Cola  vs.  Nihon Kohden

 Performance 
       Timeline  
Coca Cola 

Risk-Adjusted Performance

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Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Nihon Kohden 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Nihon Kohden has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Nihon Kohden is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Coca Cola and Nihon Kohden Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Nihon Kohden

The main advantage of trading using opposite Coca Cola and Nihon Kohden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Nihon Kohden 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 Nihon Kohden will offset losses from the drop in Nihon Kohden's long position.
The idea behind The Coca Cola and Nihon Kohden 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.
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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 Valuation module to check real value of public entities based on technical and fundamental data.

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