Correlation Between Walmart and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Walmart 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 Walmart and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Walmart and The Coca Cola, you can compare the effects of market volatilities on Walmart 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 Walmart with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Coca Cola.
Diversification Opportunities for Walmart and Coca Cola
Very good diversification
The 3 months correlation between Walmart and Coca is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Walmart 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 Walmart 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 Walmart i.e., Walmart and Coca Cola go up and down completely randomly.
Pair Corralation between Walmart and Coca Cola
Assuming the 90 days trading horizon Walmart is expected to generate 1.46 times less return on investment than Coca Cola. In addition to that, Walmart is 1.54 times more volatile than The Coca Cola. It trades about 0.07 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.16 per unit of volatility. If you would invest 1,450,000 in The Coca Cola on October 20, 2024 and sell it today you would earn a total of 40,000 from holding The Coca Cola or generate 2.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Walmart vs. The Coca Cola
Performance |
| Timeline |
| Walmart |
| Coca Cola |
Walmart and Coca Cola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Walmart and Coca Cola
The main advantage of trading using opposite Walmart and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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.| Walmart vs. United States Steel | Walmart vs. Telecom Argentina | Walmart vs. Transportadora de Gas | Walmart vs. Agrometal SAI |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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