Correlation Between Coca Cola and Prudential High

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

Diversification Opportunities for Coca Cola and Prudential High

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Coca and Prudential is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Coca-Cola and PRUDENTIAL HIGH YIELD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential High Yield 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 Prudential High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential High Yield has no effect on the direction of Coca Cola i.e., Coca Cola and Prudential High go up and down completely randomly.

Pair Corralation between Coca Cola and Prudential High

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 3.3 times more return on investment than Prudential High. However, Coca Cola is 3.3 times more volatile than Prudential High Yield. It trades about 0.15 of its potential returns per unit of risk. Prudential High Yield is currently generating about 0.33 per unit of risk. If you would invest  5,986  in The Coca Cola on December 29, 2023 and sell it today you would earn a total of  117.00  from holding The Coca Cola or generate 1.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

The Coca-Cola  vs.  PRUDENTIAL HIGH YIELD

 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.
Prudential High Yield 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Prudential High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Prudential High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola and Prudential High Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Prudential High

The main advantage of trading using opposite Coca Cola and Prudential High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Prudential High 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 Prudential High will offset losses from the drop in Prudential High's long position.
The idea behind The Coca Cola and Prudential High Yield 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 Stocks Directory module to find actively traded stocks across global markets.

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