Correlation Between Coca Cola and Bayview Acquisition

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

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

Diversification Opportunities for Coca Cola and Bayview Acquisition

-0.3

Correlation Coefficient

Coca Cola  Bayview Acquisition

Very good diversification

The 3 months correlation between Coca and Bayview is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Consolidated and Bayview Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayview Acquisition 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 Consolidated are associated (or correlated) with Bayview Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayview Acquisition Corp has no effect on the direction of Coca Cola i.e., Coca Cola and Bayview Acquisition go up and down completely randomly.

Pair Corralation between Coca Cola and Bayview Acquisition

Given the investment horizon of 90 days Coca Cola Consolidated is expected to generate 0.18 times more return on investment than Bayview Acquisition. However, Coca Cola Consolidated is 5.59 times less risky than Bayview Acquisition. It trades about -0.01 of its potential returns per unit of risk. Bayview Acquisition Corp is currently generating about -0.02 per unit of risk. If you would invest  132,621  in Coca Cola Consolidated on September 2, 2024 and sell it today you would lose (2,192) from holding Coca Cola Consolidated or give up 1.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.06%
Values	Daily Returns

Coca Cola Consolidated  vs.  Bayview Acquisition Corp

Coca Cola Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bayview Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayview Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Coca Cola and Bayview Acquisition

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

The idea behind Coca Cola Consolidated and Bayview Acquisition 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.