Correlation Between Coca Cola and THC Biomed
Can any of the company-specific risk be diversified away by investing in both Coca Cola and THC Biomed 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 THC Biomed 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 THC Biomed Intl, you can compare the effects of market volatilities on Coca Cola and THC Biomed 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 THC Biomed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and THC Biomed.
Diversification Opportunities for Coca Cola and THC Biomed
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Coca and THC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and THC Biomed Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THC Biomed Intl 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 THC Biomed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THC Biomed Intl has no effect on the direction of Coca Cola i.e., Coca Cola and THC Biomed go up and down completely randomly.
Pair Corralation between Coca Cola and THC Biomed
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 60.86 times less return on investment than THC Biomed. But when comparing it to its historical volatility, The Coca Cola is 41.79 times less risky than THC Biomed. It trades about 0.08 of its potential returns per unit of risk. THC Biomed Intl is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2.20 in THC Biomed Intl on September 1, 2024 and sell it today you would lose (2.10) from holding THC Biomed Intl or give up 95.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. THC Biomed Intl
Performance |
| Timeline |
| Coca Cola |
| THC Biomed Intl |
Coca Cola and THC Biomed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and THC Biomed
The main advantage of trading using opposite Coca Cola and THC Biomed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, THC Biomed 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 THC Biomed will offset losses from the drop in THC Biomed's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Embotelladora Andina SA | Coca Cola vs. National Beverage Corp | Coca Cola vs. Embotelladora Andina SA |
| THC Biomed vs. Brainsway | THC Biomed vs. Venus Concept | THC Biomed vs. Tactile Systems Technology | THC Biomed vs. Icecure Medical |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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