Correlation Between IShares Core and Coca Cola

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

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

Diversification Opportunities for IShares Core and Coca Cola

0.51

Correlation Coefficient

IShares Core  Coca Cola

Very weak diversification

The 3 months correlation between IShares and Coca is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP 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 IShares Core 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 iShares Core SP 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 IShares Core i.e., IShares Core and Coca Cola go up and down completely randomly.

Pair Corralation between IShares Core and Coca Cola

Considering the 90-day investment horizon IShares Core is expected to generate 4.8 times less return on investment than Coca Cola. In addition to that, IShares Core is 1.06 times more volatile than Coca Cola European Partners. It trades about 0.01 of its total potential returns per unit of risk. Coca Cola European Partners is currently generating about 0.05 per unit of volatility. If you would invest  6,271  in Coca Cola European Partners on January 24, 2024 and sell it today you would earn a total of  639.00  from holding Coca Cola European Partners or generate 10.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.46%
Values	Daily Returns

iShares Core SP  vs.  Coca Cola European Partners

iShares Core SP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Core SP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking indicators, IShares Core is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Coca Cola European

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with IShares Core and Coca Cola

The main advantage of trading using opposite IShares Core and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core SP 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.