Correlation Between LOCKHEED and Coca Cola

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

Diversification Opportunities for LOCKHEED and Coca Cola

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between LOCKHEED and Coca is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding LOCKHEED MARTIN P and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and LOCKHEED 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 LOCKHEED MARTIN P 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 LOCKHEED i.e., LOCKHEED and Coca Cola go up and down completely randomly.

Pair Corralation between LOCKHEED and Coca Cola

Assuming the 90 days trading horizon LOCKHEED is expected to generate 3.53 times less return on investment than Coca Cola. In addition to that, LOCKHEED is 1.13 times more volatile than The Coca Cola. It trades about 0.01 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  6,202  in The Coca Cola on August 30, 2024 and sell it today you would earn a total of  241.00  from holding The Coca Cola or generate 3.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy93.65%
ValuesDaily Returns

LOCKHEED MARTIN P  vs.  The Coca Cola

 Performance 
       Timeline  
LOCKHEED MARTIN P 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days LOCKHEED MARTIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOCKHEED 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

0 of 100

 
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 unsteady 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.

LOCKHEED and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LOCKHEED and Coca Cola

The main advantage of trading using opposite LOCKHEED and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LOCKHEED 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.
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The idea behind LOCKHEED MARTIN P 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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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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