Correlation Between Coca Cola and Amerisourcebergen

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

Diversification Opportunities for Coca Cola and Amerisourcebergen

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Coca Cola and Amerisourcebergen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Amerisourcebergen Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amerisourcebergen Corp and Coca Cola 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 Coca-Cola are associated (or correlated) with Amerisourcebergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amerisourcebergen Corp has no effect on the direction of Coca Cola i.e., Coca Cola and Amerisourcebergen go up and down completely randomly.

Pair Corralation between Coca Cola and Amerisourcebergen

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 2.3 times less return on investment than Amerisourcebergen. But when comparing it to its historical volatility, Coca-Cola is 1.18 times less risky than Amerisourcebergen. It trades about 0.05 of its potential returns per unit of risk. Amerisourcebergen Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11,742  in Amerisourcebergen Corp on August 31, 2022 and sell it today you would earn a total of  5,104  from holding Amerisourcebergen Corp or generate 43.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Coca-Cola  vs.  Amerisourcebergen Corp

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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

Amerisourcebergen Corp 
Amerisourcebergen Performance
11 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Amerisourcebergen Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Amerisourcebergen sustained solid returns over the last few months and may actually be approaching a breakup point.

Amerisourcebergen Price Channel

Coca Cola and Amerisourcebergen Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Amerisourcebergen

The main advantage of trading using opposite Coca Cola and Amerisourcebergen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Amerisourcebergen 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 Amerisourcebergen will offset losses from the drop in Amerisourcebergen's long position.
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The idea behind Coca-Cola and Amerisourcebergen Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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