Correlation Between Coca Cola and Investment Grade
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Investment Grade 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 Investment Grade 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 Investment Grade Porate, you can compare the effects of market volatilities on Coca Cola and Investment Grade 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 Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Investment Grade.
Diversification Opportunities for Coca Cola and Investment Grade
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and Investment is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Investment Grade Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Porate 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 Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Porate has no effect on the direction of Coca Cola i.e., Coca Cola and Investment Grade go up and down completely randomly.
Pair Corralation between Coca Cola and Investment Grade
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 2.25 times more return on investment than Investment Grade. However, Coca Cola is 2.25 times more volatile than Investment Grade Porate. It trades about 0.06 of its potential returns per unit of risk. Investment Grade Porate is currently generating about 0.08 per unit of risk. If you would invest 5,682 in The Coca Cola on August 24, 2024 and sell it today you would earn a total of 694.50 from holding The Coca Cola or generate 12.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
The Coca Cola vs. Investment Grade Porate
Performance |
| Timeline |
| Coca Cola |
| Investment Grade Porate |
Coca Cola and Investment Grade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Investment Grade
The main advantage of trading using opposite Coca Cola and Investment Grade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Investment Grade 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 Investment Grade will offset losses from the drop in Investment Grade's long position.| Coca Cola vs. Keurig Dr Pepper | Coca Cola vs. Eshallgo Class A | Coca Cola vs. Amtech Systems | Coca Cola vs. Gold Fields Ltd |
| Investment Grade vs. Investment Of America | Investment Grade vs. Investment Grade Bond | Investment Grade vs. Investment Grade Bond | Investment Grade vs. Investment Grade Bond |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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