Correlation Between Coca Cola and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Petroleo Brasileiro 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 Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola Femsa SAB and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Coca Cola and Petroleo Brasileiro 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 Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Petroleo Brasileiro.
Diversification Opportunities for Coca Cola and Petroleo Brasileiro
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Coca and Petroleo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Femsa SAB and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro 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 Femsa SAB are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Coca Cola i.e., Coca Cola and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Coca Cola and Petroleo Brasileiro
Considering the 90-day investment horizon Coca Cola is expected to generate 7.0 times less return on investment than Petroleo Brasileiro. But when comparing it to its historical volatility, Coca Cola Femsa SAB is 1.2 times less risky than Petroleo Brasileiro. It trades about 0.06 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,494 in Petroleo Brasileiro Petrobras on January 25, 2024 and sell it today you would earn a total of 187.00 from holding Petroleo Brasileiro Petrobras or generate 12.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Coca Cola Femsa SAB vs. Petroleo Brasileiro Petrobras
Performance |
Timeline |
Coca Cola Femsa |
Petroleo Brasileiro |
Coca Cola and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coca Cola and Petroleo Brasileiro
The main advantage of trading using opposite Coca Cola and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Petroleo Brasileiro 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 Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro's long position.Coca Cola vs. Vita Coco | Coca Cola vs. PepsiCo | Coca Cola vs. The Coca Cola | 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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