Correlation Between Li-Cycle Holdings and Coca Cola

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

Diversification Opportunities for Li-Cycle Holdings and Coca Cola

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Li-Cycle and Coca Cola is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Li-Cycle Holdings Corp and Coca Cola Europacific Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Europacific and Li-Cycle Holdings 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 Li-Cycle Holdings Corp are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Europacific has no effect on the direction of Li-Cycle Holdings i.e., Li-Cycle Holdings and Coca Cola go up and down completely randomly.

Pair Corralation between Li-Cycle Holdings and Coca Cola

Given the investment horizon of 90 days Li-Cycle Holdings Corp is expected to generate 2.43 times more return on investment than Coca Cola. However, Li-Cycle Holdings is 2.43 times more volatile than Coca Cola Europacific. It trades about 0.12 of its potential returns per unit of risk. Coca Cola Europacific is currently generating about 0.1 per unit of risk. If you would invest  679.00  in Li-Cycle Holdings Corp on May 14, 2022 and sell it today you would earn a total of  129.00  from holding Li-Cycle Holdings Corp or generate 19.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Li-Cycle Holdings Corp  vs.  Coca Cola Europacific Partners

 Performance (%) 
Li-Cycle Holdings Corp 
Li-Cycle Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Li-Cycle Holdings Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Li-Cycle Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Li-Cycle Price Channel

Coca Cola Europacific 
Coca Cola Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Europacific are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Coca Cola is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

Coca Cola Price Channel

Li-Cycle Holdings and Coca Cola Volatility Contrast

   Predicted Return Density   

Pair Trading with Li-Cycle Holdings and Coca Cola

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

Li-Cycle Holdings Corp

Pair trading matchups for Li-Cycle Holdings

The idea behind Li-Cycle Holdings Corp and Coca Cola Europacific 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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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