Correlation Between Coca Cola and SPDR FactSet
Can any of the company-specific risk be diversified away by investing in both Coca Cola and SPDR FactSet 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 SPDR FactSet 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 SPDR FactSet Innovative, you can compare the effects of market volatilities on Coca Cola and SPDR FactSet 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 SPDR FactSet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and SPDR FactSet.
Diversification Opportunities for Coca Cola and SPDR FactSet
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Coca and SPDR is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and SPDR FactSet Innovative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR FactSet Innovative 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 SPDR FactSet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR FactSet Innovative has no effect on the direction of Coca Cola i.e., Coca Cola and SPDR FactSet go up and down completely randomly.
Pair Corralation between Coca Cola and SPDR FactSet
Allowing for the 90-day total investment horizon Coca Cola is expected to generate 8.34 times less return on investment than SPDR FactSet. But when comparing it to its historical volatility, The Coca Cola is 2.03 times less risky than SPDR FactSet. It trades about 0.02 of its potential returns per unit of risk. SPDR FactSet Innovative is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 10,142 in SPDR FactSet Innovative on August 26, 2024 and sell it today you would earn a total of 7,927 from holding SPDR FactSet Innovative or generate 78.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. SPDR FactSet Innovative
Performance |
| Timeline |
| Coca Cola |
| SPDR FactSet Innovative |
Coca Cola and SPDR FactSet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and SPDR FactSet
The main advantage of trading using opposite Coca Cola and SPDR FactSet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, SPDR FactSet 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 SPDR FactSet will offset losses from the drop in SPDR FactSet's long position.The idea behind The Coca Cola and SPDR FactSet Innovative 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.| SPDR FactSet vs. SPDR SP Software | SPDR FactSet vs. SPDR Morgan Stanley | SPDR FactSet vs. SPDR SP Health |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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