Correlation Between Coca Cola and ProShares Short
Can any of the company-specific risk be diversified away by investing in both Coca Cola and ProShares Short 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 ProShares Short 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 ProShares Short SmallCap600, you can compare the effects of market volatilities on Coca Cola and ProShares Short 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and ProShares Short.
Diversification Opportunities for Coca Cola and ProShares Short
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and ProShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and ProShares Short SmallCap600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short Smal 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short Smal has no effect on the direction of Coca Cola i.e., Coca Cola and ProShares Short go up and down completely randomly.
Pair Corralation between Coca Cola and ProShares Short
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.51 times more return on investment than ProShares Short. However, The Coca Cola is 1.95 times less risky than ProShares Short. It trades about -0.23 of its potential returns per unit of risk. ProShares Short SmallCap600 is currently generating about -0.22 per unit of risk. If you would invest 6,692 in The Coca Cola on August 26, 2024 and sell it today you would lose (300.00) from holding The Coca Cola or give up 4.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. ProShares Short SmallCap600
Performance |
| Timeline |
| Coca Cola |
| ProShares Short Smal |
Coca Cola and ProShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and ProShares Short
The main advantage of trading using opposite Coca Cola and ProShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, ProShares Short 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 ProShares Short will offset losses from the drop in ProShares Short's long position.The idea behind The Coca Cola and ProShares Short SmallCap600 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| ProShares Short vs. ProShares Short MidCap400 | ProShares Short vs. ProShares UltraShort SmallCap600 | ProShares Short vs. ProShares UltraShort MidCap400 | ProShares Short vs. ProShares UltraShort Health |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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