Correlation Between Coca Cola and AllovirInc

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and AllovirInc 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 AllovirInc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca-Cola Co and AllovirInc, you can compare the effects of market volatilities on Coca Cola and AllovirInc 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 AllovirInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and AllovirInc.

Diversification Opportunities for Coca Cola and AllovirInc

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Coca Cola and AllovirInc is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola Co and AllovirInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllovirInc 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 Co are associated (or correlated) with AllovirInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllovirInc has no effect on the direction of Coca Cola i.e., Coca Cola and AllovirInc go up and down completely randomly.

Pair Corralation between Coca Cola and AllovirInc

Allowing for the 90-day total investment horizon Coca-Cola Co is expected to generate 0.2 times more return on investment than AllovirInc. However, Coca-Cola Co is 5.1 times less risky than AllovirInc. It trades about 0.05 of its potential returns per unit of risk. AllovirInc is currently generating about -0.03 per unit of risk. If you would invest  5,016  in Coca-Cola Co on September 4, 2022 and sell it today you would earn a total of  1,419  from holding Coca-Cola Co or generate 28.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Coca-Cola Co  vs.  AllovirInc

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Coca Cola Price Channel

AllovirInc 
AllovirInc Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AllovirInc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AllovirInc reported solid returns over the last few months and may actually be approaching a breakup point.

AllovirInc Price Channel

Coca Cola and AllovirInc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and AllovirInc

The main advantage of trading using opposite Coca Cola and AllovirInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, AllovirInc 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 AllovirInc will offset losses from the drop in AllovirInc's long position.
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The idea behind Coca-Cola Co and AllovirInc 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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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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