Correlation Between Block and Coca Cola

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

Diversification Opportunities for Block and Coca Cola

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Block and Coca Cola is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Block Inc 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 Block 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 Block Inc 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 Block i.e., Block and Coca Cola go up and down completely randomly.

Pair Corralation between Block and Coca Cola

Allowing for the 90-day total investment horizon Block Inc is expected to under-perform the Coca Cola. In addition to that, Block is 2.69 times more volatile than Coca Cola Europacific. It trades about -0.06 of its total potential returns per unit of risk. Coca Cola Europacific is currently generating about -0.02 per unit of volatility. If you would invest  5,260  in Coca Cola Europacific on July 9, 2022 and sell it today you would lose (755.00)  from holding Coca Cola Europacific or give up 14.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Block Inc  vs.  Coca Cola Europacific Partners

 Performance (%) 
       Timeline  
Block Inc 
Block Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Block Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Block is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the insiders.

Block Price Channel

Coca Cola Europacific 
Coca Cola Performance
0 of 100
Over the last 90 days Coca Cola Europacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

Coca Cola Price Channel

Block and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Block and Coca Cola

The main advantage of trading using opposite Block and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Block 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.
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The idea behind Block Inc 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.
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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