Correlation Between Coca Cola and West High
Can any of the company-specific risk be diversified away by investing in both Coca Cola and West High 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 West High 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 West High Yield, you can compare the effects of market volatilities on Coca Cola and West High 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 West High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and West High.
Diversification Opportunities for Coca Cola and West High
Excellent diversification
The 3 months correlation between Coca and West is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and West High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West High Yield 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 West High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West High Yield has no effect on the direction of Coca Cola i.e., Coca Cola and West High go up and down completely randomly.
Pair Corralation between Coca Cola and West High
Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the West High. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 6.36 times less risky than West High. The stock trades about -0.06 of its potential returns per unit of risk. The West High Yield is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 15.00 in West High Yield on September 1, 2024 and sell it today you would earn a total of 5.00 from holding West High Yield or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. West High Yield
Performance |
| Timeline |
| Coca Cola |
| West High Yield |
Coca Cola and West High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and West High
The main advantage of trading using opposite Coca Cola and West High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, West High 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 West High will offset losses from the drop in West High'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 |
| West High vs. South32 Limited | West High vs. NioCorp Developments Ltd | West High vs. HUMANA INC | West High vs. SCOR PK |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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