Correlation Between Coca Cola and Boston Scientific

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

By analyzing existing cross correlation between Coca Cola Co and Boston Scientific Corp, you can compare the effects of market volatilities on Coca Cola and Boston Scientific 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 Boston Scientific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Boston Scientific.

Diversification Opportunities for Coca Cola and Boston Scientific

-0.75

Correlation Coefficient

Coca Cola  Boston Scientific

Pay attention - limited upside

The 3 months correlation between Coca and Boston is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Co and Boston Scientific Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific Corp 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 Co are associated (or correlated) with Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific Corp has no effect on the direction of Coca Cola i.e., Coca Cola and Boston Scientific go up and down completely randomly.

Pair Corralation between Coca Cola and Boston Scientific

Assuming the 90 days trading horizon Coca Cola Co is expected to under-perform the Boston Scientific. But the stock apears to be less risky and, when comparing its historical volatility, Coca Cola Co is 1.25 times less risky than Boston Scientific. The stock trades about -0.22 of its potential returns per unit of risk. The Boston Scientific Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,393  in Boston Scientific Corp on September 21, 2024 and sell it today you would earn a total of  520.00  from holding Boston Scientific Corp or generate 6.2% return on investment over 90 days.

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

Coca Cola Co  vs.  Boston Scientific Corp

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Boston Scientific Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Boston Scientific is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Coca Cola and Boston Scientific

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

The idea behind Coca Cola Co and Boston Scientific Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.