Correlation Between Coca Cola and Natl Beverage

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

Diversification Opportunities for Coca Cola and Natl Beverage

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Coca Cola and Natl Beverage is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Natl Beverage Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natl Beverage Cp 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 Natl Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natl Beverage Cp has no effect on the direction of Coca Cola i.e., Coca Cola and Natl Beverage go up and down completely randomly.

Pair Corralation between Coca Cola and Natl Beverage

Allowing for the 90-day total investment horizon Coca-Cola is expected to generate 0.5 times more return on investment than Natl Beverage. However, Coca-Cola is 2.01 times less risky than Natl Beverage. It trades about -0.26 of its potential returns per unit of risk. Natl Beverage Cp is currently generating about -0.43 per unit of risk. If you would invest  6,074  in Coca-Cola on July 6, 2022 and sell it today you would lose (396.00)  from holding Coca-Cola or give up 6.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Coca-Cola  vs.  Natl Beverage Cp

 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

Natl Beverage Cp 
Natl Beverage Performance
0 of 100
Over the last 90 days Natl Beverage Cp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Natl Beverage Price Channel

Coca Cola and Natl Beverage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Natl Beverage

The main advantage of trading using opposite Coca Cola and Natl Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Natl Beverage 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 Natl Beverage will offset losses from the drop in Natl Beverage's long position.
Coca Cola vs. Amazon Inc
The idea behind Coca-Cola and Natl Beverage Cp 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.
Natl Beverage vs. Amazon Inc
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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