Correlation Between Britvic PLC and Coca Cola

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

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

Diversification Opportunities for Britvic PLC and Coca Cola

-0.01

Correlation Coefficient

Britvic PLC  Coca Cola

Good diversification

The 3 months correlation between Britvic and Coca is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Britvic PLC ADR 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 Britvic PLC 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 Britvic PLC ADR 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 Britvic PLC i.e., Britvic PLC and Coca Cola go up and down completely randomly.

Pair Corralation between Britvic PLC and Coca Cola

Assuming the 90 days horizon Britvic PLC ADR is expected to generate 1.12 times more return on investment than Coca Cola. However, Britvic PLC is 1.12 times more volatile than Coca Cola European Partners. It trades about 0.1 of its potential returns per unit of risk. Coca Cola European Partners is currently generating about -0.12 per unit of risk. If you would invest  2,041  in Britvic PLC ADR on January 25, 2024 and sell it today you would earn a total of  45.00  from holding Britvic PLC ADR or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Britvic PLC ADR  vs.  Coca Cola European Partners

Britvic PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Britvic PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Britvic PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola European

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 1 (%) 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.

Pair Trading with Britvic PLC and Coca Cola

The main advantage of trading using opposite Britvic PLC and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Britvic PLC 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 Britvic PLC ADR 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.