Correlation Between Coca Cola and Adams Natural
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Adams Natural 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 Adams Natural 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 Adams Natural Resources, you can compare the effects of market volatilities on Coca Cola and Adams Natural 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 Adams Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Adams Natural.
Diversification Opportunities for Coca Cola and Adams Natural
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and Adams is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources 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 Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of Coca Cola i.e., Coca Cola and Adams Natural go up and down completely randomly.
Pair Corralation between Coca Cola and Adams Natural
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.1 times less return on investment than Adams Natural. But when comparing it to its historical volatility, The Coca Cola is 1.21 times less risky than Adams Natural. It trades about 0.07 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,915 in Adams Natural Resources on September 14, 2024 and sell it today you would earn a total of 293.00 from holding Adams Natural Resources or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. Adams Natural Resources
Performance |
| Timeline |
| Coca Cola |
| Adams Natural Resources |
Coca Cola and Adams Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Adams Natural
The main advantage of trading using opposite Coca Cola and Adams Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Adams Natural 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 Adams Natural will offset losses from the drop in Adams Natural's long position.| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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