Correlation Between Coca Cola and STEP Energy
Can any of the company-specific risk be diversified away by investing in both Coca Cola and STEP Energy 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 STEP Energy 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 STEP Energy Services, you can compare the effects of market volatilities on Coca Cola and STEP Energy 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 STEP Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and STEP Energy.
Diversification Opportunities for Coca Cola and STEP Energy
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Coca and STEP is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and STEP Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEP Energy Services 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 STEP Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEP Energy Services has no effect on the direction of Coca Cola i.e., Coca Cola and STEP Energy go up and down completely randomly.
Pair Corralation between Coca Cola and STEP Energy
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 3.78 times less return on investment than STEP Energy. But when comparing it to its historical volatility, The Coca Cola is 4.37 times less risky than STEP Energy. It trades about 0.02 of its potential returns per unit of risk. STEP Energy Services is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 365.00 in STEP Energy Services on September 2, 2024 and sell it today you would earn a total of 0.00 from holding STEP Energy Services or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Coca Cola vs. STEP Energy Services
Performance |
| Timeline |
| Coca Cola |
| STEP Energy Services |
Coca Cola and STEP Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and STEP Energy
The main advantage of trading using opposite Coca Cola and STEP Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, STEP Energy 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 STEP Energy will offset losses from the drop in STEP Energy'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 |
| STEP Energy vs. Total Energy Services | STEP Energy vs. Trican Well Service | STEP Energy vs. Koil Energy Solutions | STEP Energy vs. TerraVest Industries |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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