Correlation Between Coca Cola and Bank of Botetourt
Can any of the company-specific risk be diversified away by investing in both Coca Cola and Bank of Botetourt 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 Bank of Botetourt 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 Bank of Botetourt, you can compare the effects of market volatilities on Coca Cola and Bank of Botetourt 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 Bank of Botetourt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Bank of Botetourt.
Diversification Opportunities for Coca Cola and Bank of Botetourt
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Coca and Bank is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Bank of Botetourt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Botetourt 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 Bank of Botetourt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Botetourt has no effect on the direction of Coca Cola i.e., Coca Cola and Bank of Botetourt go up and down completely randomly.
Pair Corralation between Coca Cola and Bank of Botetourt
Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Bank of Botetourt. In addition to that, Coca Cola is 1.14 times more volatile than Bank of Botetourt. It trades about -0.22 of its total potential returns per unit of risk. Bank of Botetourt is currently generating about 0.07 per unit of volatility. If you would invest 3,110 in Bank of Botetourt on August 31, 2024 and sell it today you would earn a total of 104.00 from holding Bank of Botetourt or generate 3.34% 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. Bank of Botetourt
Performance |
Timeline |
Coca Cola |
Bank of Botetourt |
Coca Cola and Bank of Botetourt Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Coca Cola and Bank of Botetourt
The main advantage of trading using opposite Coca Cola and Bank of Botetourt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Bank of Botetourt 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 Bank of Botetourt will offset losses from the drop in Bank of Botetourt's long position.Coca Cola vs. Monster Beverage Corp | Coca Cola vs. RLJ Lodging Trust | Coca Cola vs. Aquagold International | Coca Cola vs. Stepstone Group |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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