Correlation Between Coca Cola and Goldman Sachs

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

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

Diversification Opportunities for Coca Cola and Goldman Sachs

0.65

Correlation Coefficient

Coca Cola  Goldman Sachs

Poor diversification

The 3 months correlation between Coca and Goldman is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Goldman Sachs Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Me and Coca Cola 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 Coca Cola European Partners are associated (or correlated) with Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Me has no effect on the direction of Coca Cola i.e., Coca Cola and Goldman Sachs go up and down completely randomly.

Pair Corralation between Coca Cola and Goldman Sachs

Given the investment horizon of 90 days Coca Cola European Partners is expected to under-perform the Goldman Sachs. In addition to that, Coca Cola is 2.22 times more volatile than Goldman Sachs Income. It trades about -0.12 of its total potential returns per unit of risk. Goldman Sachs Income is currently generating about -0.11 per unit of volatility. If you would invest  2,538  in Goldman Sachs Income on January 25, 2024 and sell it today you would lose (28.00) from holding Goldman Sachs Income or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Coca Cola European Partners  vs.  Goldman Sachs Income

Coca Cola European

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 2 (%) 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.

Goldman Sachs Me

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Income are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and Goldman Sachs

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

The idea behind Coca Cola European Partners and Goldman Sachs Income 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.