Correlation Between Coca Cola and Core Laboratories

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

Diversification Opportunities for Coca Cola and Core Laboratories

0.59
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Coca Cola and Core Laboratories

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 4.46 times less return on investment than Core Laboratories. But when comparing it to its historical volatility, Coca-Cola Co is 3.35 times less risky than Core Laboratories. It trades about 0.09 of its potential returns per unit of risk. Core Laboratories NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,703  in Core Laboratories NV on September 4, 2022 and sell it today you would earn a total of  494.00  from holding Core Laboratories NV or generate 29.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Coca-Cola Co  vs.  Core Laboratories NV

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Coca Cola Price Channel

Core Laboratories 
Core Laboratories Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Core Laboratories NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat sluggish essential indicators, Core Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Core Laboratories Price Channel

Coca Cola and Core Laboratories Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Core Laboratories

The main advantage of trading using opposite Coca Cola and Core Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Core Laboratories 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 Core Laboratories will offset losses from the drop in Core Laboratories' long position.
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The idea behind Coca-Cola Co and Core Laboratories NV 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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