Correlation Between Coca Cola and Carlsberg

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

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

Diversification Opportunities for Coca Cola and Carlsberg

0.02

Correlation Coefficient

Coca Cola  Carlsberg

Significant diversification

The 3 months correlation between Coca and Carlsberg is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola HBC and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS 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 HBC are associated (or correlated) with Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Coca Cola i.e., Coca Cola and Carlsberg go up and down completely randomly.

Pair Corralation between Coca Cola and Carlsberg

Assuming the 90 days horizon Coca Cola HBC is expected to generate 0.96 times more return on investment than Carlsberg. However, Coca Cola HBC is 1.04 times less risky than Carlsberg. It trades about 0.17 of its potential returns per unit of risk. Carlsberg AS is currently generating about -0.03 per unit of risk. If you would invest  2,263  in Coca Cola HBC on September 23, 2024 and sell it today you would earn a total of  800.00  from holding Coca Cola HBC or generate 35.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.17%
Values	Daily Returns

Coca Cola HBC  vs.  Carlsberg AS

Coca Cola HBC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola HBC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Carlsberg AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carlsberg AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Coca Cola and Carlsberg

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

The idea behind Coca Cola HBC and Carlsberg AS 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.