Correlation Between Coca Cola and Alfi

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

Diversification Opportunities for Coca Cola and Alfi

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Coca Cola and Alfi is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Alfi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfi Inc 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 Alfi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfi Inc has no effect on the direction of Coca Cola i.e., Coca Cola and Alfi go up and down completely randomly.

Pair Corralation between Coca Cola and Alfi

Allowing for the 90-day total investment horizon Coca-Cola is expected to generate 0.32 times more return on investment than Alfi. However, Coca-Cola is 3.13 times less risky than Alfi. It trades about -0.31 of its potential returns per unit of risk. Alfi Inc is currently generating about -0.29 per unit of risk. If you would invest  6,118  in Coca-Cola on July 7, 2022 and sell it today you would lose (494.00)  from holding Coca-Cola or give up 8.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Coca-Cola  vs.  Alfi Inc

 Performance (%) 
       Timeline  
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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Coca Cola Price Channel

Alfi Inc 
Alfi Performance
0 of 100
Over the last 90 days Alfi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in November 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alfi Price Channel

Coca Cola and Alfi Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Alfi

The main advantage of trading using opposite Coca Cola and Alfi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Alfi 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 Alfi will offset losses from the drop in Alfi's long position.
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The idea behind Coca-Cola and Alfi Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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