Correlation Between Coca Cola and BankUnited

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

Diversification Opportunities for Coca Cola and BankUnited

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Coca Cola and BankUnited is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited 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 BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of Coca Cola i.e., Coca Cola and BankUnited go up and down completely randomly.

Pair Corralation between Coca Cola and BankUnited

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 77.23 times less return on investment than BankUnited. But when comparing it to its historical volatility, Coca-Cola is 1.83 times less risky than BankUnited. It trades about 0.01 of its potential returns per unit of risk. BankUnited is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  3,479  in BankUnited on May 11, 2022 and sell it today you would earn a total of  387.00  from holding BankUnited or generate 11.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Coca-Cola  vs.  BankUnited

 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

BankUnited 
BankUnited Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in BankUnited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, BankUnited is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

BankUnited Price Channel

Coca Cola and BankUnited Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and BankUnited

The main advantage of trading using opposite Coca Cola and BankUnited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, BankUnited 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 BankUnited will offset losses from the drop in BankUnited's long position.
The idea behind Coca-Cola and BankUnited 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.

BankUnited

Pair trading matchups for BankUnited

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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