Correlation Between Coca Cola and 08949LAB6

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and 08949LAB6 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 08949LAB6 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 BIG RIV STL, you can compare the effects of market volatilities on Coca Cola and 08949LAB6 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 08949LAB6. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and 08949LAB6.

Diversification Opportunities for Coca Cola and 08949LAB6

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Coca and 08949LAB6 is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and BIG RIV STL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIG RIV STL 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 08949LAB6. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIG RIV STL has no effect on the direction of Coca Cola i.e., Coca Cola and 08949LAB6 go up and down completely randomly.

Pair Corralation between Coca Cola and 08949LAB6

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the 08949LAB6. In addition to that, Coca Cola is 3.89 times more volatile than BIG RIV STL. It trades about -0.02 of its total potential returns per unit of risk. BIG RIV STL is currently generating about 0.05 per unit of volatility. If you would invest  10,078  in BIG RIV STL on September 12, 2024 and sell it today you would earn a total of  15.00  from holding BIG RIV STL or generate 0.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy72.73%
ValuesDaily Returns

The Coca Cola  vs.  BIG RIV STL

 Performance 
       Timeline  
Coca Cola 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
BIG RIV STL 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BIG RIV STL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 08949LAB6 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola and 08949LAB6 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and 08949LAB6

The main advantage of trading using opposite Coca Cola and 08949LAB6 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, 08949LAB6 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 08949LAB6 will offset losses from the drop in 08949LAB6's long position.
The idea behind The Coca Cola and BIG RIV STL 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.
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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