Correlation Between Coca Cola and LQR House

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

Diversification Opportunities for Coca Cola and LQR House

CocaLQRDiversified AwayCocaLQRDiversified Away100%
-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Coca and LQR is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and LQR House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LQR House 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 LQR House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LQR House has no effect on the direction of Coca Cola i.e., Coca Cola and LQR House go up and down completely randomly.

Pair Corralation between Coca Cola and LQR House

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.08 times more return on investment than LQR House. However, The Coca Cola is 12.0 times less risky than LQR House. It trades about 0.06 of its potential returns per unit of risk. LQR House is currently generating about -0.06 per unit of risk. If you would invest  5,570  in The Coca Cola on November 29, 2024 and sell it today you would earn a total of  1,517  from holding The Coca Cola or generate 27.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy78.74%
ValuesDaily Returns

The Coca Cola  vs.  LQR House

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -30-20-100102030
JavaScript chart by amCharts 3.21.15KO YHC
       Timeline  
Coca Cola 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb626466687072
LQR House 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in LQR House are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, LQR House exhibited solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.811.21.41.61.822.2

Coca Cola and LQR House Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.55-2.66-1.77-0.880.00.961.932.93.87 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15KO YHC
       Returns  

Pair Trading with Coca Cola and LQR House

The main advantage of trading using opposite Coca Cola and LQR House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, LQR House 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 LQR House will offset losses from the drop in LQR House's long position.
The idea behind The Coca Cola and LQR House 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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