Correlation Between Coca Cola and Overlay Shares
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Overlay Shares 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 Overlay Shares 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 Overlay Shares Foreign, you can compare the effects of market volatilities on Coca Cola and Overlay Shares 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 Overlay Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Overlay Shares.
Diversification Opportunities for Coca Cola and Overlay Shares
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Overlay is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Overlay Shares Foreign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overlay Shares Foreign 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 Overlay Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overlay Shares Foreign has no effect on the direction of Coca Cola i.e., Coca Cola and Overlay Shares go up and down completely randomly.
Pair Corralation between Coca Cola and Overlay Shares
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.88 times more return on investment than Overlay Shares. However, The Coca Cola is 1.14 times less risky than Overlay Shares. It trades about 0.04 of its potential returns per unit of risk. Overlay Shares Foreign is currently generating about 0.01 per unit of risk. If you would invest 6,155 in The Coca Cola on August 31, 2024 and sell it today you would earn a total of 253.00 from holding The Coca Cola or generate 4.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Overlay Shares Foreign
Performance |
| Timeline |
| Coca Cola |
| Overlay Shares Foreign |
Coca Cola and Overlay Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Overlay Shares
The main advantage of trading using opposite Coca Cola and Overlay Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Overlay Shares 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 Overlay Shares will offset losses from the drop in Overlay Shares' long position.| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. RLJ Lodging Trust | Coca Cola vs. Aquagold International | Coca Cola vs. Stepstone Group |
| Overlay Shares vs. iShares ESG Aggregate | Overlay Shares vs. SPDR MSCI Emerging | Overlay Shares vs. Aquagold International | Overlay Shares vs. Thrivent High Yield |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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