Correlation Between Alico and Coca Cola

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

Diversification Opportunities for Alico and Coca Cola

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alico and Coca is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Coca-Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola European and Alico 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 Alico 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 European has no effect on the direction of Alico i.e., Alico and Coca Cola go up and down completely randomly.

Pair Corralation between Alico and Coca Cola

Given the investment horizon of 90 days Alico Inc is expected to under-perform the Coca Cola. In addition to that, Alico is 1.45 times more volatile than Coca Cola European Partners. It trades about -0.02 of its total potential returns per unit of risk. Coca Cola European Partners is currently generating about 0.07 per unit of volatility. If you would invest  4,576  in Coca Cola European Partners on December 30, 2023 and sell it today you would earn a total of  2,419  from holding Coca Cola European Partners or generate 52.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alico Inc  vs.  Coca-Cola European Partners

 Performance 
       Timeline  
Alico Inc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Weak
Over the last 90 days Alico Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Alico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Coca-Cola European 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Coca Cola is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Alico and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alico and Coca Cola

The main advantage of trading using opposite Alico and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alico 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.
The idea behind Alico Inc and Coca Cola European Partners 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 the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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