Correlation Between Visa and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Coca Cola Consolidated, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Coca Cola.
Diversification Opportunities for Visa and Coca Cola
Very good diversification
The 3 months correlation between Visa and Coca is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated and Visa 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 Visa Class A 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 Consolidated has no effect on the direction of Visa i.e., Visa and Coca Cola go up and down completely randomly.
Pair Corralation between Visa and Coca Cola
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.65 times more return on investment than Coca Cola. However, Visa Class A is 1.54 times less risky than Coca Cola. It trades about 0.28 of its potential returns per unit of risk. Coca Cola Consolidated is currently generating about 0.01 per unit of risk. If you would invest 27,442 in Visa Class A on August 31, 2024 and sell it today you would earn a total of 4,028 from holding Visa Class A or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Coca Cola Consolidated
Performance |
| Timeline |
| Visa Class A |
| Coca Cola Consolidated |
Visa and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Coca Cola
The main advantage of trading using opposite Visa and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
| Coca Cola vs. Vita Coco | Coca Cola vs. PepsiCo | Coca Cola vs. The Coca Cola | Coca Cola vs. Coca Cola Femsa SAB |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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