Correlation Between Coca Cola and SohuCom

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

Diversification Opportunities for Coca Cola and SohuCom

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Coca Cola and SohuCom is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Coca-Cola Co and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom 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 SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of Coca Cola i.e., Coca Cola and SohuCom go up and down completely randomly.

Pair Corralation between Coca Cola and SohuCom

Allowing for the 90-day total investment horizon Coca-Cola Co is expected to generate 0.31 times more return on investment than SohuCom. However, Coca-Cola Co is 3.2 times less risky than SohuCom. It trades about 0.05 of its potential returns per unit of risk. SohuCom is currently generating about 0.0 per unit of risk. If you would invest  4,773  in Coca-Cola Co on November 4, 2022 and sell it today you would earn a total of  1,239  from holding Coca-Cola Co or generate 25.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Coca-Cola Co  vs.  SohuCom

 Performance (%) 
       Timeline  
Coca-Cola 
Coca Cola Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Coca-Cola Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Coca Cola is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Coca Cola Price Channel

SohuCom 
SohuCom Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SohuCom are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, SohuCom may actually be approaching a critical reversion point that can send shares even higher in March 2023.

SohuCom Price Channel

Coca Cola and SohuCom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and SohuCom

The main advantage of trading using opposite Coca Cola and SohuCom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, SohuCom 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 SohuCom will offset losses from the drop in SohuCom's long position.
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The idea behind Coca-Cola Co and SohuCom 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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