Correlation Between Eq Energy and Coca Cola

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

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

Diversification Opportunities for Eq Energy and Coca Cola

0.01

Correlation Coefficient

Eq Energy Coca Cola

Significant diversification

The 3 months correlation between EQLB and Coca is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and The Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola and Eq Energy 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 Eq Energy Drink 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 Eq Energy i.e., Eq Energy and Coca Cola go up and down completely randomly.

Pair Corralation between Eq Energy and Coca Cola

Given the investment horizon of 90 days Eq Energy Drink is expected to under-perform the Coca Cola. In addition to that, Eq Energy is 40.35 times more volatile than The Coca Cola. It trades about -0.07 of its total potential returns per unit of risk. The Coca Cola is currently generating about -0.5 per unit of volatility. If you would invest  6,430  in The Coca Cola on February 28, 2023 and sell it today you would lose (404.00)  from holding The Coca Cola or give up 6.28% of portfolio value over 90 days.

Eq Energy Drink  vs.  The Coca-Cola

Eq Energy Drink

EQLB Performance

0 of 100

Over the last 90 days Eq Energy Drink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unfluctuating essential indicators, Eq Energy may actually be approaching a critical reversion point that can send shares even higher in June 2023.

Coca-Cola

Coca Performance

3 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 3 (%) 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 current stock price disarray, may contribute to short-term losses for the insiders.

Pair Trading with Eq Energy and Coca Cola

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

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 ETF Directory module to find actively traded Exchange Traded Funds (ETF) from around the world.