Correlation Between Coca Cola and IndexIQ

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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

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Coca and IndexIQ is -0.28. 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

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.22 times more return on investment than IndexIQ. However, The Coca Cola is 4.56 times less risky than IndexIQ. It trades about 0.0 of its potential returns per unit of risk. IndexIQ is currently generating about -0.05 per unit of risk. If you would invest  6,257  in The Coca Cola on November 24, 2023 and sell it today you would lose (133.00) from holding The Coca Cola or give up 2.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy91.3%
ValuesDaily Returns

The Coca-Cola  vs.  IndexIQ

 Performance 
       Timeline  
Coca-Cola 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 7 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.
IndexIQ 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in March 2024. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Coca Cola and IndexIQ Volatility Contrast

   Predicted Return Density   
       Returns  

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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