Correlation Between Coca Cola and IndexIQ

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

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

Diversification Opportunities for Coca Cola and IndexIQ

0.58

Correlation Coefficient

Coca Cola  IndexIQ

Very weak diversification

The 3 months correlation between Coca and IndexIQ is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 The Coca Cola are associated (or correlated) with IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of Coca Cola i.e., Coca Cola and IndexIQ go up and down completely randomly.

Pair Corralation between Coca Cola and IndexIQ

If you would invest  6,253  in The Coca Cola on July 8, 2024 and sell it today you would earn a total of  764.00  from holding The Coca Cola or generate 12.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.54%
Values	Daily Returns

The Coca Cola  vs.  IndexIQ

Coca Cola

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in November 2024.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IndexIQ is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Coca Cola and IndexIQ

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

The idea behind The Coca Cola and IndexIQ 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.