Correlation Between Kar Auction and Coca Cola

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

Diversification Opportunities for Kar Auction and Coca Cola

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Kar Auction and Coca Cola is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kar Auction Services 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 Kar Auction 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 Kar Auction Services 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 Kar Auction i.e., Kar Auction and Coca Cola go up and down completely randomly.

Pair Corralation between Kar Auction and Coca Cola

Considering the 90-day investment horizon Kar Auction Services is expected to generate 1.24 times more return on investment than Coca Cola. However, Kar Auction is 1.24 times more volatile than Coca Cola Europacific. It trades about 0.15 of its potential returns per unit of risk. Coca Cola Europacific is currently generating about 0.08 per unit of risk. If you would invest  1,534  in Kar Auction Services on May 10, 2022 and sell it today you would earn a total of  94.00  from holding Kar Auction Services or generate 6.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Kar Auction Services  vs.  Coca Cola Europacific Partners

 Performance (%) 
       Timeline  
Kar Auction Services 
Kar Auction Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Kar Auction Services are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kar Auction reported solid returns over the last few months and may actually be approaching a breakup point.

Kar Auction Price Channel

Coca Cola Europacific 
Coca Cola Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Europacific are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Coca Cola Price Channel

Kar Auction and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kar Auction and Coca Cola

The main advantage of trading using opposite Kar Auction and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kar Auction 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 Kar Auction Services 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.
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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.

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