Correlation Between Coca Cola and Legg Mason
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Legg Mason 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 Legg Mason 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 Legg Mason Partners, you can compare the effects of market volatilities on Coca Cola and Legg Mason 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 Legg Mason. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Legg Mason.
Diversification Opportunities for Coca Cola and Legg Mason
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Coca and Legg is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Legg Mason Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legg Mason Partners 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 Legg Mason. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legg Mason Partners has no effect on the direction of Coca Cola i.e., Coca Cola and Legg Mason go up and down completely randomly.
Pair Corralation between Coca Cola and Legg Mason
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 2.69 times less return on investment than Legg Mason. But when comparing it to its historical volatility, The Coca Cola is 1.43 times less risky than Legg Mason. It trades about 0.03 of its potential returns per unit of risk. Legg Mason Partners is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,833 in Legg Mason Partners on September 3, 2024 and sell it today you would earn a total of 634.00 from holding Legg Mason Partners or generate 34.59% 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. Legg Mason Partners
Performance |
| Timeline |
| Coca Cola |
| Legg Mason Partners |
Coca Cola and Legg Mason Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Legg Mason
The main advantage of trading using opposite Coca Cola and Legg Mason positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Legg Mason 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 Legg Mason will offset losses from the drop in Legg Mason'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 |
| Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard 500 Index | Legg Mason vs. Vanguard Total Stock | Legg Mason vs. Vanguard Total Stock |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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