Correlation Between Wal Mart and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Wal Mart 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 Wal Mart and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wal Mart de Mxico and Coca Cola FEMSA SAB, you can compare the effects of market volatilities on Wal Mart 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 Wal Mart with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wal Mart and Coca Cola.
Diversification Opportunities for Wal Mart and Coca Cola
Poor diversification
The 3 months correlation between Wal and Coca is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wal Mart de Mxico 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 Wal Mart 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 Wal Mart de Mxico 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 Wal Mart i.e., Wal Mart and Coca Cola go up and down completely randomly.
Pair Corralation between Wal Mart and Coca Cola
Assuming the 90 days trading horizon Wal Mart de Mxico is expected to under-perform the Coca Cola. In addition to that, Wal Mart is 1.27 times more volatile than Coca Cola FEMSA SAB. It trades about -0.11 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about -0.03 per unit of volatility. If you would invest 16,224 in Coca Cola FEMSA SAB on September 3, 2024 and sell it today you would lose (118.00) from holding Coca Cola FEMSA SAB or give up 0.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wal Mart de Mxico vs. Coca Cola FEMSA SAB
Performance |
| Timeline |
| Wal Mart de |
| Coca Cola FEMSA |
Wal Mart and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wal Mart and Coca Cola
The main advantage of trading using opposite Wal Mart and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wal Mart 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.| Wal Mart vs. Alsea SAB de | Wal Mart vs. Grupo Bimbo SAB | Wal Mart vs. Fomento Econmico Mexicano | Wal Mart vs. Grupo Financiero Banorte |
| Coca Cola vs. Arca Continental SAB | Coca Cola vs. Wal Mart de Mxico | Coca Cola vs. Fomento Econmico Mexicano | Coca Cola vs. Orbia Advance |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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