Correlation Between Pfizer and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Pfizer and Coca Cola 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 Pfizer and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pfizer Inc and The Coca Cola, you can compare the effects of market volatilities on Pfizer and Coca Cola 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 Pfizer with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pfizer and Coca Cola.
Diversification Opportunities for Pfizer and Coca Cola
Very poor diversification
The 3 months correlation between Pfizer and Coca is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Pfizer Inc and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Pfizer 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 Pfizer Inc are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Pfizer i.e., Pfizer and Coca Cola go up and down completely randomly.
Pair Corralation between Pfizer and Coca Cola
Considering the 90-day investment horizon Pfizer Inc is expected to under-perform the Coca Cola. In addition to that, Pfizer is 1.75 times more volatile than The Coca Cola. It trades about -0.28 of its total potential returns per unit of risk. The Coca Cola is currently generating about -0.31 per unit of volatility. If you would invest 6,801 in The Coca Cola on August 24, 2024 and sell it today you would lose (425.00) from holding The Coca Cola or give up 6.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pfizer Inc vs. The Coca Cola
Performance |
| Timeline |
| Pfizer Inc |
| Coca Cola |
Pfizer and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pfizer and Coca Cola
The main advantage of trading using opposite Pfizer and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pfizer position performs unexpectedly, Coca Cola 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 Coca Cola will offset losses from the drop in Coca Cola's long position.| Pfizer vs. Merck Company | Pfizer vs. Johnson Johnson | Pfizer vs. Eshallgo Class A | Pfizer vs. Amtech Systems |
| Coca Cola vs. Keurig Dr Pepper | Coca Cola vs. Eshallgo Class A | Coca Cola vs. Amtech Systems | Coca Cola vs. Gold Fields Ltd |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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