Correlation Between Laboratory and Coca Cola

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

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

Diversification Opportunities for Laboratory and Coca Cola

-0.06

Correlation Coefficient

Laboratory  Coca Cola

Good diversification

The 3 months correlation between Laboratory and Coca is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Laboratory of and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Laboratory 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 Laboratory of 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 Laboratory i.e., Laboratory and Coca Cola go up and down completely randomly.

Pair Corralation between Laboratory and Coca Cola

Allowing for the 90-day total investment horizon Laboratory of is expected to under-perform the Coca Cola. In addition to that, Laboratory is 1.14 times more volatile than The Coca Cola. It trades about -0.14 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.1 per unit of volatility. If you would invest  6,040  in The Coca Cola on January 25, 2024 and sell it today you would earn a total of  115.00  from holding The Coca Cola or generate 1.9% return on investment over 90 days.

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

Laboratory of  vs.  The Coca Cola

Laboratory

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratory of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Coca Cola

Risk-Adjusted Performance

7 of 100

Modest

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 newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Laboratory and Coca Cola

The main advantage of trading using opposite Laboratory and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Laboratory 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 Laboratory of 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.