Correlation Between Wells Fargo and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and The Coca Cola, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Coca Cola.
Diversification Opportunities for Wells Fargo and Coca Cola
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Wells and Coca is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Coca Cola go up and down completely randomly.
Pair Corralation between Wells Fargo and Coca Cola
Assuming the 90 days trading horizon Wells Fargo is expected to generate 2.25 times more return on investment than Coca Cola. However, Wells Fargo is 2.25 times more volatile than The Coca Cola. It trades about 0.2 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.22 per unit of risk. If you would invest 1,510,000 in Wells Fargo on August 30, 2024 and sell it today you would earn a total of 185,000 from holding Wells Fargo or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. The Coca Cola
Performance |
| Timeline |
| Wells Fargo |
| Coca Cola |
Wells Fargo and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Coca Cola
The main advantage of trading using opposite Wells Fargo and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Transportadora de Gas | Wells Fargo vs. Agrometal SAI | Wells Fargo vs. Compania de Transporte | Wells Fargo vs. Harmony Gold Mining |
| Coca Cola vs. Harmony Gold Mining | Coca Cola vs. Compania de Transporte | Coca Cola vs. Agrometal SAI | Coca Cola vs. Transportadora de Gas |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |