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

0.34

Correlation Coefficient

Eq Energy  Coca Cola

Weak diversification

The 3 months correlation between EQLB and Coca is 0.34. 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 generate 24.79 times more return on investment than Coca Cola. However, Eq Energy is 24.79 times more volatile than The Coca Cola. It trades about 0.09 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.32 per unit of risk. If you would invest  0.10  in Eq Energy Drink on February 7, 2024 and sell it today you would earn a total of  0.00  from holding Eq Energy Drink or generate 0.0% return on investment over 90 days.

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

Eq Energy Drink  vs.  The Coca Cola

Eq Energy Drink

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eq Energy Drink are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Eq Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 8 (%) 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 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .