Correlation Between International Business and Coca Cola

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

Diversification Opportunities for International Business and Coca Cola

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between International and Coca Cola is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine 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 International Business 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 International Business Machines 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 International Business i.e., International Business and Coca Cola go up and down completely randomly.

Pair Corralation between International Business and Coca Cola

Considering the 90-day investment horizon International Business Machines is expected to generate 0.64 times more return on investment than Coca Cola. However, International Business Machines is 1.56 times less risky than Coca Cola. It trades about -0.22 of its potential returns per unit of risk. Coca Cola Europacific is currently generating about -0.33 per unit of risk. If you would invest  12,845  in International Business Machines on July 2, 2022 and sell it today you would lose (682.00)  from holding International Business Machines or give up 5.31% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

International Business Machine  vs.  Coca Cola Europacific Partners

 Performance (%) 
       Timeline  
International Business 
International Performance
0 of 100
Over the last 90 days International Business Machines has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's fundamental drivers remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

International 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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in October 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Coca Cola Price Channel

International Business and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Business and Coca Cola

The main advantage of trading using opposite International Business and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.
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The idea behind International Business Machines 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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