Correlation Between Coca Cola and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Travelers Companies 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 Travelers Companies 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 The Travelers Companies, you can compare the effects of market volatilities on Coca Cola and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Travelers Companies.
Diversification Opportunities for Coca Cola and Travelers Companies
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Coca and Travelers is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of Coca Cola i.e., Coca Cola and Travelers Companies go up and down completely randomly.
Pair Corralation between Coca Cola and Travelers Companies
Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.34 times more return on investment than Travelers Companies. However, The Coca Cola is 2.95 times less risky than Travelers Companies. It trades about -0.22 of its potential returns per unit of risk. The Travelers Companies is currently generating about -0.15 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 | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
The Coca Cola vs. The Travelers Companies
Performance |
Timeline |
Coca Cola |
The Travelers Companies |
Coca Cola and Travelers Companies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coca Cola and Travelers Companies
The main advantage of trading using opposite Coca Cola and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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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 the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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