Correlation Between Coca Cola and Ferrovial
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Ferrovial 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 Ferrovial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola European Partners and Ferrovial, you can compare the effects of market volatilities on Coca Cola and Ferrovial 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 Ferrovial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Ferrovial.
Diversification Opportunities for Coca Cola and Ferrovial
Very weak diversification
The 3 months correlation between Coca and Ferrovial is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Ferrovial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrovial 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 European Partners are associated (or correlated) with Ferrovial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrovial has no effect on the direction of Coca Cola i.e., Coca Cola and Ferrovial go up and down completely randomly.
Pair Corralation between Coca Cola and Ferrovial
Assuming the 90 days trading horizon Coca Cola is expected to generate 7.84 times less return on investment than Ferrovial. In addition to that, Coca Cola is 1.08 times more volatile than Ferrovial. It trades about 0.01 of its total potential returns per unit of risk. Ferrovial is currently generating about 0.12 per unit of volatility. If you would invest 3,709 in Ferrovial on September 5, 2024 and sell it today you would earn a total of 361.00 from holding Ferrovial or generate 9.73% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Coca Cola European Partners vs. Ferrovial
Performance |
Timeline |
Coca Cola European |
Ferrovial |
Coca Cola and Ferrovial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coca Cola and Ferrovial
The main advantage of trading using opposite Coca Cola and Ferrovial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Ferrovial 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 Ferrovial will offset losses from the drop in Ferrovial's long position.Coca Cola vs. International Consolidated Airlines | Coca Cola vs. Metrovacesa SA | Coca Cola vs. Elecnor SA | Coca Cola vs. Mapfre |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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