Correlation Between Coca Cola and NETGEAR
Can any of the company-specific risk be diversified away by investing in both Coca Cola and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Coca Cola and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and NETGEAR.
Diversification Opportunities for Coca Cola and NETGEAR
Pay attention - limited upside
The 3 months correlation between Coca and NETGEAR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Coca Cola i.e., Coca Cola and NETGEAR go up and down completely randomly.
Pair Corralation between Coca Cola and NETGEAR
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 4.48 times less return on investment than NETGEAR. But when comparing it to its historical volatility, The Coca Cola is 3.67 times less risky than NETGEAR. It trades about 0.03 of its potential returns per unit of risk. NETGEAR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,936 in NETGEAR on August 31, 2024 and sell it today you would earn a total of 524.00 from holding NETGEAR or generate 27.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. NETGEAR
Performance |
| Timeline |
| Coca Cola |
| NETGEAR |
Coca Cola and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and NETGEAR
The main advantage of trading using opposite Coca Cola and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. RLJ Lodging Trust | Coca Cola vs. Aquagold International | Coca Cola vs. Stepstone Group |
| NETGEAR vs. KVH Industries | NETGEAR vs. Ituran Location and | NETGEAR vs. Aviat Networks | NETGEAR vs. Mynaric AG ADR |
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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