Correlation Between Coca Cola and EQUITABLE

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and EQUITABLE 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 EQUITABLE 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 EQUITABLE INC 7, you can compare the effects of market volatilities on Coca Cola and EQUITABLE 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 EQUITABLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and EQUITABLE.

Diversification Opportunities for Coca Cola and EQUITABLE

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Coca and EQUITABLE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and EQUITABLE INC 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUITABLE INC 7 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 EQUITABLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUITABLE INC 7 has no effect on the direction of Coca Cola i.e., Coca Cola and EQUITABLE go up and down completely randomly.

Pair Corralation between Coca Cola and EQUITABLE

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the EQUITABLE. In addition to that, Coca Cola is 1.28 times more volatile than EQUITABLE INC 7. It trades about -0.21 of its total potential returns per unit of risk. EQUITABLE INC 7 is currently generating about -0.07 per unit of volatility. If you would invest  10,817  in EQUITABLE INC 7 on September 2, 2024 and sell it today you would lose (279.00) from holding EQUITABLE INC 7 or give up 2.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy81.25%
ValuesDaily Returns

The Coca Cola  vs.  EQUITABLE INC 7

 Performance 
       Timeline  
Coca Cola 

Risk-Adjusted Performance

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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.
EQUITABLE INC 7 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EQUITABLE INC 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EQUITABLE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola and EQUITABLE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and EQUITABLE

The main advantage of trading using opposite Coca Cola and EQUITABLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, EQUITABLE 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 EQUITABLE will offset losses from the drop in EQUITABLE's long position.
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The idea behind The Coca Cola and EQUITABLE INC 7 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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