Correlation Between Amazon and Coca-Cola European

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

Diversification Opportunities for Amazon and Coca-Cola European

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Amazon and Coca-Cola is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Coca-Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola European and Amazon 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 Amazon Inc are associated (or correlated) with Coca-Cola European. 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 European has no effect on the direction of Amazon i.e., Amazon and Coca-Cola European go up and down completely randomly.

Pair Corralation between Amazon and Coca-Cola European

Given the investment horizon of 90 days Amazon Inc is expected to under-perform the Coca-Cola European. In addition to that, Amazon is 1.33 times more volatile than Coca-Cola European Partners. It trades about -0.04 of its total potential returns per unit of risk. Coca-Cola European Partners is currently generating about 0.03 per unit of volatility. If you would invest  4,435  in Coca-Cola European Partners on September 8, 2022 and sell it today you would earn a total of  814.00  from holding Coca-Cola European Partners or generate 18.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Amazon Inc  vs.  Coca-Cola European Partners

 Performance (%) 
       Timeline  
Amazon Inc 
Amazon Performance
0 of 100
Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2023. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Amazon Price Channel

Coca-Cola European 
Coca-Cola Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola European Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish technical and fundamental indicators, Coca-Cola European may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Coca-Cola Price Channel

Amazon and Coca-Cola European Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Amazon and Coca-Cola European

The main advantage of trading using opposite Amazon and Coca-Cola European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Coca-Cola European 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 European will offset losses from the drop in Coca-Cola European's long position.
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The idea behind Amazon Inc and Coca-Cola European Partners 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.
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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