Correlation Between NorAm Drilling and Coca Cola
Can any of the company-specific risk be diversified away by investing in both NorAm Drilling 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 NorAm Drilling and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorAm Drilling AS and Coca Cola FEMSA SAB, you can compare the effects of market volatilities on NorAm Drilling 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 NorAm Drilling with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorAm Drilling and Coca Cola.
Diversification Opportunities for NorAm Drilling and Coca Cola
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NorAm and Coca is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding NorAm Drilling AS and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA and NorAm Drilling 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 NorAm Drilling AS 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 FEMSA has no effect on the direction of NorAm Drilling i.e., NorAm Drilling and Coca Cola go up and down completely randomly.
Pair Corralation between NorAm Drilling and Coca Cola
Assuming the 90 days horizon NorAm Drilling is expected to generate 10.58 times less return on investment than Coca Cola. But when comparing it to its historical volatility, NorAm Drilling AS is 3.5 times less risky than Coca Cola. It trades about 0.01 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 800.00 in Coca Cola FEMSA SAB on September 2, 2024 and sell it today you would lose (75.00) from holding Coca Cola FEMSA SAB or give up 9.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorAm Drilling AS vs. Coca Cola FEMSA SAB
Performance |
| Timeline |
| NorAm Drilling AS |
| Coca Cola FEMSA |
NorAm Drilling and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorAm Drilling and Coca Cola
The main advantage of trading using opposite NorAm Drilling and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorAm Drilling 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.| NorAm Drilling vs. SIEM OFFSHORE NEW | NorAm Drilling vs. UMC Electronics Co | NorAm Drilling vs. LPKF Laser Electronics | NorAm Drilling vs. CECO ENVIRONMENTAL |
| Coca Cola vs. Charter Communications | Coca Cola vs. International Consolidated Airlines | Coca Cola vs. Entravision Communications | Coca Cola vs. Computershare Limited |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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