Correlation Between Coca Cola and VanEck India

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

Diversification Opportunities for Coca Cola and VanEck India

0.89

Correlation Coefficient

Coca Cola  VanEck India

Very poor diversification

The 3 months correlation between Coca and VanEck is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and VanEck India Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck India Growth 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 VanEck India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck India Growth has no effect on the direction of Coca Cola i.e., Coca Cola and VanEck India go up and down completely randomly.

Pair Corralation between Coca Cola and VanEck India

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the VanEck India. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.04 times less risky than VanEck India. The stock trades about -0.2 of its potential returns per unit of risk. The VanEck India Growth is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,386  in VanEck India Growth on August 30, 2024 and sell it today you would lose (170.00) from holding VanEck India Growth or give up 3.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

The Coca Cola  vs.  VanEck India Growth

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 unsteady 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.

VanEck India Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck India Growth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, VanEck India is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and VanEck India

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

The idea behind The Coca Cola and VanEck India Growth 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.