Correlation Between BlackRock and Coca Cola

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

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

Diversification Opportunities for BlackRock and Coca Cola

-0.76

Correlation Coefficient

BlackRock  Coca Cola

Pay attention - limited upside

The 3 months correlation between BlackRock and Coca is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and BlackRock 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 BlackRock 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 BlackRock i.e., BlackRock and Coca Cola go up and down completely randomly.

Pair Corralation between BlackRock and Coca Cola

Assuming the 90 days trading horizon BlackRock is expected to generate 1.44 times more return on investment than Coca Cola. However, BlackRock is 1.44 times more volatile than The Coca Cola. It trades about 0.24 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.08 per unit of risk. If you would invest  84,320  in BlackRock on September 24, 2024 and sell it today you would earn a total of  13,180  from holding BlackRock or generate 15.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.46%
Values	Daily Returns

BlackRock  vs.  The Coca Cola

BlackRock

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days BlackRock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BlackRock reported solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BlackRock and Coca Cola

The main advantage of trading using opposite BlackRock and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock 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 BlackRock 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.