Correlation Between Coca Cola and Pimco Funds

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

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

Diversification Opportunities for Coca Cola and Pimco Funds

-0.67

Correlation Coefficient

Coca Cola  Pimco Funds

Excellent diversification

The 3 months correlation between Coca and PIMCO is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Pimco Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pimco Funds 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 The Coca Cola are associated (or correlated) with Pimco Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pimco Funds has no effect on the direction of Coca Cola i.e., Coca Cola and Pimco Funds go up and down completely randomly.

Pair Corralation between Coca Cola and Pimco Funds

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Pimco Funds. In addition to that, Coca Cola is 6.68 times more volatile than Pimco Funds . It trades about -0.22 of its total potential returns per unit of risk. Pimco Funds is currently generating about 0.13 per unit of volatility. If you would invest  99.00  in Pimco Funds on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Pimco Funds or generate 1.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The Coca Cola  vs.  Pimco Funds

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 latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pimco Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pimco Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and Pimco Funds

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

The idea behind The Coca Cola and Pimco Funds 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.