Correlation Between Boeing and Coca Cola

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

Diversification Opportunities for Boeing and Coca Cola

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Boeing and Coca Cola is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Boeing Company and Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola and Boeing 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 Boeing Company 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 Boeing i.e., Boeing and Coca Cola go up and down completely randomly.

Pair Corralation between Boeing and Coca Cola

Allowing for the 90-day total investment horizon Boeing is expected to generate 2.43 times less return on investment than Coca Cola. In addition to that, Boeing is 2.37 times more volatile than Coca-Cola. It trades about 0.01 of its total potential returns per unit of risk. Coca-Cola is currently generating about 0.07 per unit of volatility. If you would invest  4,452  in Coca-Cola on May 12, 2022 and sell it today you would earn a total of  1,853  from holding Coca-Cola or generate 41.62% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Boeing Company  vs.  Coca-Cola

 Performance (%) 
       Timeline  
Boeing Company 
Boeing Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Company are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

Coca-Cola 
Coca Cola Performance
0 of 100
Over the last 90 days Coca-Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Coca Cola is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Coca Cola Price Channel

Boeing and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Boeing and Coca Cola

The main advantage of trading using opposite Boeing and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.
The idea behind Boeing Company and Coca-Cola 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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