Correlation Between Coca Cola and Bodycote PLC

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Bodycote PLC 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 Bodycote PLC 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 Bodycote PLC, you can compare the effects of market volatilities on Coca Cola and Bodycote PLC 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 Bodycote PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Bodycote PLC.

Diversification Opportunities for Coca Cola and Bodycote PLC

-0.45

Correlation Coefficient

Coca Cola  Bodycote PLC

Very good diversification

The 3 months correlation between Coca and Bodycote is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Co and Bodycote PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bodycote PLC 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 Bodycote PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bodycote PLC has no effect on the direction of Coca Cola i.e., Coca Cola and Bodycote PLC go up and down completely randomly.

Pair Corralation between Coca Cola and Bodycote PLC

Assuming the 90 days trading horizon Coca Cola Co is expected to under-perform the Bodycote PLC. But the stock apears to be less risky and, when comparing its historical volatility, Coca Cola Co is 2.03 times less risky than Bodycote PLC. The stock trades about -0.23 of its potential returns per unit of risk. The Bodycote PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  58,909  in Bodycote PLC on September 24, 2024 and sell it today you would earn a total of  3,791  from holding Bodycote PLC or generate 6.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Coca Cola Co  vs.  Bodycote PLC

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bodycote PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bodycote PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bodycote PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and Bodycote PLC

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

The idea behind Coca Cola Co and Bodycote PLC 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 Global Correlations module to find global opportunities by holding instruments from different markets.