Correlation Between Laureate Education and Coca Cola

Can any of the company-specific risk be diversified away by investing in both Laureate Education and Coca Cola 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 Laureate Education and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Laureate Education and The Coca Cola, you can compare the effects of market volatilities on Laureate Education and Coca Cola 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 Laureate Education with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Laureate Education and Coca Cola.

Diversification Opportunities for Laureate Education and Coca Cola

0.5

Correlation Coefficient

Laureate Education  Coca Cola

Very weak diversification

The 3 months correlation between Laureate and Coca is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Laureate Education and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Laureate Education 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 Laureate Education are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Laureate Education i.e., Laureate Education and Coca Cola go up and down completely randomly.

Pair Corralation between Laureate Education and Coca Cola

Assuming the 90 days trading horizon Laureate Education is expected to under-perform the Coca Cola. In addition to that, Laureate Education is 1.85 times more volatile than The Coca Cola. It trades about -0.42 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.12 per unit of volatility. If you would invest  5,728  in The Coca Cola on March 21, 2024 and sell it today you would earn a total of  111.00  from holding The Coca Cola or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Laureate Education  vs.  The Coca Cola

Laureate Education

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laureate Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Laureate Education is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Coca Cola

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Laureate Education and Coca Cola

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

The idea behind Laureate Education and The Coca Cola 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.