Correlation Between Prudential Financial and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Prudential Financial 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 Prudential Financial and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and The Coca Cola, you can compare the effects of market volatilities on Prudential Financial 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 Prudential Financial with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and Coca Cola.
Diversification Opportunities for Prudential Financial and Coca Cola
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prudential and Coca is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Prudential Financial 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 Prudential Financial 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 Prudential Financial i.e., Prudential Financial and Coca Cola go up and down completely randomly.
Pair Corralation between Prudential Financial and Coca Cola
Assuming the 90 days trading horizon Prudential Financial is expected to generate 0.22 times more return on investment than Coca Cola. However, Prudential Financial is 4.61 times less risky than Coca Cola. It trades about 0.22 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.01 per unit of risk. If you would invest 198,872 in Prudential Financial on September 4, 2024 and sell it today you would earn a total of 2,628 from holding Prudential Financial or generate 1.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prudential Financial vs. The Coca Cola
Performance |
| Timeline |
| Prudential Financial |
| Coca Cola |
Prudential Financial and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and Coca Cola
The main advantage of trading using opposite Prudential Financial and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial 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.| Prudential Financial vs. The Select Sector | Prudential Financial vs. Promotora y Operadora | Prudential Financial vs. SPDR Series Trust | Prudential Financial vs. Vanguard World |
| Coca Cola vs. Deutsche Bank Aktiengesellschaft | Coca Cola vs. Capital One Financial | Coca Cola vs. Prudential Financial | Coca Cola vs. DXC Technology |
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 Stocks Directory module to find actively traded stocks across global markets.
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