Correlation Between Coca Cola and PT Bank

Can any of the company-specific risk be diversified away by investing in both Coca Cola and PT Bank 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 PT Bank 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 PT Bank Rakyat, you can compare the effects of market volatilities on Coca Cola and PT Bank 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 PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and PT Bank.

Diversification Opportunities for Coca Cola and PT Bank

0.75

Correlation Coefficient

Coca Cola  PT Bank

Poor diversification

The 3 months correlation between Coca and BKRKF is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Coca Cola i.e., Coca Cola and PT Bank go up and down completely randomly.

Pair Corralation between Coca Cola and PT Bank

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.16 times more return on investment than PT Bank. However, The Coca Cola is 6.43 times less risky than PT Bank. It trades about -0.22 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.07 per unit of risk. If you would invest  7,197  in The Coca Cola on September 3, 2024 and sell it today you would lose (832.00) from holding The Coca Cola or give up 11.56% of portfolio value over 90 days.

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

The Coca Cola  vs.  PT Bank Rakyat

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.

PT Bank Rakyat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Rakyat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Coca Cola and PT Bank

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

The idea behind The Coca Cola and PT Bank Rakyat 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.