Correlation Between ATT and Coca Cola

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Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Coca Cola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and The Coca Cola, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Coca Cola.

Diversification Opportunities for ATT and Coca Cola

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between ATT and Coca is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and The Coca-Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca-Cola and ATT 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 ATT Inc 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 ATT i.e., ATT and Coca Cola go up and down completely randomly.

Pair Corralation between ATT and Coca Cola

Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.63 times more return on investment than Coca Cola. However, ATT is 1.63 times more volatile than The Coca Cola. It trades about 0.21 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.17 per unit of risk. If you would invest  1,683  in ATT Inc on December 29, 2023 and sell it today you would earn a total of  77.00  from holding ATT Inc or generate 4.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ATT Inc  vs.  The Coca-Cola

 Performance 
       Timeline  
ATT Inc 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Coca-Cola 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
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 latest stock price disarray, may contribute to short-term losses for the investors.

ATT and Coca Cola Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATT and Coca Cola

The main advantage of trading using opposite ATT and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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.
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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