Correlation Between Coca Cola and Jpmorgan Small

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Jpmorgan Small 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 Jpmorgan Small 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 Jpmorgan Small Cap, you can compare the effects of market volatilities on Coca Cola and Jpmorgan Small 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 Jpmorgan Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Jpmorgan Small.

Diversification Opportunities for Coca Cola and Jpmorgan Small

0.49

Correlation Coefficient

Coca Cola  Jpmorgan Small

Very weak diversification

The 3 months correlation between Coca and Jpmorgan is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Jpmorgan Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Small Cap 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 Jpmorgan Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Small Cap has no effect on the direction of Coca Cola i.e., Coca Cola and Jpmorgan Small go up and down completely randomly.

Pair Corralation between Coca Cola and Jpmorgan Small

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.69 times more return on investment than Jpmorgan Small. However, The Coca Cola is 1.45 times less risky than Jpmorgan Small. It trades about -0.22 of its potential returns per unit of risk. Jpmorgan Small Cap is currently generating about -0.26 per unit of risk. If you would invest  6,075  in The Coca Cola on January 20, 2024 and sell it today you would lose (184.00) from holding The Coca Cola or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

The Coca Cola  vs.  Jpmorgan Small Cap

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Jpmorgan Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jpmorgan Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Jpmorgan Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and Jpmorgan Small

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

The idea behind The Coca Cola and Jpmorgan Small Cap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.