Correlation Between ABBVIE and Coca Cola

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Can any of the company-specific risk be diversified away by investing in both ABBVIE 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 ABBVIE and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ABBVIE INC 36 and The Coca Cola, you can compare the effects of market volatilities on ABBVIE 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 ABBVIE with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of ABBVIE and Coca Cola.

Diversification Opportunities for ABBVIE and Coca Cola

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between ABBVIE and Coca is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ABBVIE INC 36 and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and ABBVIE 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 ABBVIE INC 36 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 ABBVIE i.e., ABBVIE and Coca Cola go up and down completely randomly.

Pair Corralation between ABBVIE and Coca Cola

Assuming the 90 days trading horizon ABBVIE INC 36 is expected to generate 0.38 times more return on investment than Coca Cola. However, ABBVIE INC 36 is 2.65 times less risky than Coca Cola. It trades about -0.27 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.12 per unit of risk. If you would invest  9,937  in ABBVIE INC 36 on August 31, 2024 and sell it today you would lose (193.00) from holding ABBVIE INC 36 or give up 1.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.65%
ValuesDaily Returns

ABBVIE INC 36  vs.  The Coca Cola

 Performance 
       Timeline  
ABBVIE INC 36 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days ABBVIE INC 36 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ABBVIE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Coca Cola 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

ABBVIE and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ABBVIE and Coca Cola

The main advantage of trading using opposite ABBVIE and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ABBVIE 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 ABBVIE INC 36 and The Coca Cola 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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