Correlation Between Coca Cola and Pfizer

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

Diversification Opportunities for Coca Cola and Pfizer

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Coca Cola and Pfizer is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola and Pfizer Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfizer 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 Pfizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfizer Inc has no effect on the direction of Coca Cola i.e., Coca Cola and Pfizer go up and down completely randomly.

Pair Corralation between Coca Cola and Pfizer

Allowing for the 90-day total investment horizon Coca-Cola is expected to generate 0.67 times more return on investment than Pfizer. However, Coca-Cola is 1.49 times less risky than Pfizer. It trades about 0.13 of its potential returns per unit of risk. Pfizer Inc is currently generating about 0.0 per unit of risk. If you would invest  5,957  in Coca-Cola on May 19, 2022 and sell it today you would earn a total of  546.00  from holding Coca-Cola or generate 9.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Coca-Cola  vs.  Pfizer Inc

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Coca Cola Price Channel

Pfizer Inc 
Pfizer Performance
0 of 100
Over the last 90 days Pfizer Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Pfizer is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pfizer Price Channel

Coca Cola and Pfizer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Pfizer

The main advantage of trading using opposite Coca Cola and Pfizer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Pfizer 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 Pfizer will offset losses from the drop in Pfizer's long position.
The idea behind Coca-Cola and Pfizer 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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