Correlation Between DIAGEO and Coca Cola
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By analyzing existing cross correlation between DIAGEO CAP PLC and The Coca Cola, you can compare the effects of market volatilities on DIAGEO 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 DIAGEO with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIAGEO and Coca Cola.
Diversification Opportunities for DIAGEO and Coca Cola
Poor diversification
The 3 months correlation between DIAGEO and Coca is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding DIAGEO CAP PLC and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and DIAGEO 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 DIAGEO CAP PLC 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 DIAGEO i.e., DIAGEO and Coca Cola go up and down completely randomly.
Pair Corralation between DIAGEO and Coca Cola
Assuming the 90 days trading horizon DIAGEO is expected to generate 1.25 times less return on investment than Coca Cola. In addition to that, DIAGEO is 1.26 times more volatile than The Coca Cola. It trades about 0.03 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.04 per unit of volatility. If you would invest 5,722 in The Coca Cola on August 31, 2024 and sell it today you would earn a total of 686.00 from holding The Coca Cola or generate 11.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.56% |
| Values | Daily Returns |
DIAGEO CAP PLC vs. The Coca Cola
Performance |
| Timeline |
| DIAGEO CAP PLC |
| Coca Cola |
DIAGEO and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DIAGEO and Coca Cola
The main advantage of trading using opposite DIAGEO and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DIAGEO 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 DIAGEO CAP PLC 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.| Coca Cola vs. Monster Beverage Corp | Coca Cola vs. RLJ Lodging Trust | Coca Cola vs. Aquagold International | Coca Cola vs. Stepstone Group |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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