Correlation Between Pershing Square and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Pershing Square 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 Pershing Square and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pershing Square Holdings and Coca Cola Europacific Partners, you can compare the effects of market volatilities on Pershing Square 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 Pershing Square with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pershing Square and Coca Cola.
Diversification Opportunities for Pershing Square and Coca Cola
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Pershing and Coca is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pershing Square Holdings and Coca Cola Europacific Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Europacific and Pershing Square 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 Pershing Square Holdings 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 Europacific has no effect on the direction of Pershing Square i.e., Pershing Square and Coca Cola go up and down completely randomly.
Pair Corralation between Pershing Square and Coca Cola
Assuming the 90 days trading horizon Pershing Square is expected to generate 1.19 times less return on investment than Coca Cola. In addition to that, Pershing Square is 1.21 times more volatile than Coca Cola Europacific Partners. It trades about 0.06 of its total potential returns per unit of risk. Coca Cola Europacific Partners is currently generating about 0.09 per unit of volatility. If you would invest 4,788 in Coca Cola Europacific Partners on September 2, 2024 and sell it today you would earn a total of 2,542 from holding Coca Cola Europacific Partners or generate 53.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pershing Square Holdings vs. Coca Cola Europacific Partners
Performance |
| Timeline |
| Pershing Square Holdings |
| Coca Cola Europacific |
Pershing Square and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pershing Square and Coca Cola
The main advantage of trading using opposite Pershing Square and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pershing Square 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.The idea behind Pershing Square Holdings and Coca Cola Europacific Partners 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.| Coca Cola vs. Heineken Holding NV | Coca Cola vs. IMCD NV | Coca Cola vs. Wolters Kluwer NV | Coca Cola vs. Koninklijke Vopak NV |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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