Correlation Between Apple and Coca Cola

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

Diversification Opportunities for Apple and Coca Cola

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Apple and Coca Cola is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Coca Cola Europacific Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Europacific and Apple 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 Apple Inc 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 Europacific has no effect on the direction of Apple i.e., Apple and Coca Cola go up and down completely randomly.

Pair Corralation between Apple and Coca Cola

Given the investment horizon of 90 days Apple is expected to generate 1.05 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Apple Inc is 1.1 times less risky than Coca Cola. It trades about 0.04 of its potential returns per unit of risk. Coca Cola Europacific is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,521  in Coca Cola Europacific on July 9, 2022 and sell it today you would earn a total of  942.00  from holding Coca Cola Europacific or generate 26.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Coca Cola Europacific Partners

 Performance (%) 
       Timeline  
Apple Inc 
Apple Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Apple is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Apple Price Channel

Coca Cola Europacific 
Coca Cola Performance
0 of 100
Over the last 90 days Coca Cola Europacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Coca Cola Price Channel

Apple and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Coca Cola

The main advantage of trading using opposite Apple and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.
Apple vs. Amazon Inc
The idea behind Apple Inc and Coca Cola Europacific 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.
Coca Cola vs. Amazon Inc
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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