Correlation Between Coca Cola and Boeing

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

Diversification Opportunities for Coca Cola and Boeing

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Coca Cola and Boeing is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Boeing Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing Company 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing Company has no effect on the direction of Coca Cola i.e., Coca Cola and Boeing go up and down completely randomly.

Pair Corralation between Coca Cola and Boeing

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 73.81 times less return on investment than Boeing. But when comparing it to its historical volatility, Coca-Cola is 2.95 times less risky than Boeing. It trades about 0.01 of its potential returns per unit of risk. Boeing Company is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  13,699  in Boeing Company on May 11, 2022 and sell it today you would earn a total of  2,786  from holding Boeing Company or generate 20.34% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Coca-Cola  vs.  Boeing Company

 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 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 Company 
Boeing Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Company are ranked lower than 9 (%) 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 and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Boeing

The main advantage of trading using opposite Coca Cola and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.
The idea behind Coca-Cola and Boeing Company 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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