Correlation Between Coca Cola and Willamette Valley
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Willamette Valley 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 Willamette Valley 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 Willamette Valley Vineyards, you can compare the effects of market volatilities on Coca Cola and Willamette Valley 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 Willamette Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Willamette Valley.
Diversification Opportunities for Coca Cola and Willamette Valley
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Coca and Willamette is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Coca Cola i.e., Coca Cola and Willamette Valley go up and down completely randomly.
Pair Corralation between Coca Cola and Willamette Valley
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.27 times more return on investment than Willamette Valley. However, The Coca Cola is 3.66 times less risky than Willamette Valley. It trades about -0.03 of its potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.01 per unit of risk. If you would invest 6,487 in The Coca Cola on October 22, 2024 and sell it today you would lose (216.00) from holding The Coca Cola or give up 3.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
The Coca Cola vs. Willamette Valley Vineyards
Performance |
| Timeline |
| Coca Cola |
| Willamette Valley |
Coca Cola and Willamette Valley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and Willamette Valley
The main advantage of trading using opposite Coca Cola and Willamette Valley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Willamette Valley 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 Willamette Valley will offset losses from the drop in Willamette Valley's long position.| Coca Cola vs. Coca Cola Femsa SAB | Coca Cola vs. Roche Holding AG | Coca Cola vs. Champions Oncology | Coca Cola vs. Target 2030 Fund |
| Willamette Valley vs. Naked Wines plc | Willamette Valley vs. Pernod Ricard SA | Willamette Valley vs. Brown Forman | Willamette Valley vs. Treasury Wine Estates |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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