Correlation Between Altria and Coca Cola
Can any of the company-specific risk be diversified away by investing in both Altria 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 Altria and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and The Coca Cola, you can compare the effects of market volatilities on Altria 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 Altria with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Coca Cola.
Diversification Opportunities for Altria and Coca Cola
Very weak diversification
The 3 months correlation between Altria and Coca is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Altria 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 Altria Group 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 Altria i.e., Altria and Coca Cola go up and down completely randomly.
Pair Corralation between Altria and Coca Cola
Allowing for the 90-day total investment horizon Altria Group is expected to under-perform the Coca Cola. In addition to that, Altria is 1.13 times more volatile than The Coca Cola. It trades about -0.08 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.02 per unit of volatility. If you would invest 6,040 in The Coca Cola on January 24, 2024 and sell it today you would earn a total of 15.00 from holding The Coca Cola or generate 0.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Altria Group vs. The Coca Cola
Performance |
Timeline |
Altria Group |
Coca Cola |
Altria and Coca Cola Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Altria and Coca Cola
The main advantage of trading using opposite Altria and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria 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.Altria vs. Hempacco Co | Altria vs. Green Globe International | Altria vs. Imperial Brands PLC | Altria vs. Kaival Brands Innovations |
Coca Cola vs. Monster Beverage Corp | Coca Cola vs. Celsius Holdings | Coca Cola vs. Coca Cola Consolidated | Coca Cola vs. Keurig Dr Pepper |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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