Correlation Between Bunge and Coca Cola

Can any of the company-specific risk be diversified away by investing in both Bunge 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 Bunge and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bunge Limited and The Coca Cola, you can compare the effects of market volatilities on Bunge 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 Bunge with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Coca Cola.

Diversification Opportunities for Bunge and Coca Cola

0.19

Correlation Coefficient

Bunge  Coca Cola

Average diversification

The 3 months correlation between Bunge and Coca is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Bunge 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 Bunge Limited 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 has no effect on the direction of Bunge i.e., Bunge and Coca Cola go up and down completely randomly.

Pair Corralation between Bunge and Coca Cola

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 1.91 times more return on investment than Coca Cola. However, Bunge is 1.91 times more volatile than The Coca Cola. It trades about 0.01 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.01 per unit of risk. If you would invest  10,922  in Bunge Limited on January 25, 2024 and sell it today you would lose (321.00) from holding Bunge Limited or give up 2.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Bunge Limited  vs.  The Coca Cola

Bunge Limited

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bunge reported solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bunge and Coca Cola

The main advantage of trading using opposite Bunge and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited and The Coca Cola 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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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.