Correlation Between Coca Cola and Hong Kong

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

Diversification Opportunities for Coca Cola and Hong Kong

-0.93

Correlation Coefficient

Coca Cola  Hong Kong

Pay attention - limited upside

The 3 months correlation between Coca and Hong is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Land has no effect on the direction of Coca Cola i.e., Coca Cola and Hong Kong go up and down completely randomly.

Pair Corralation between Coca Cola and Hong Kong

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.34 times more return on investment than Hong Kong. However, The Coca Cola is 2.91 times less risky than Hong Kong. It trades about -0.09 of its potential returns per unit of risk. Hong Kong Land is currently generating about -0.15 per unit of risk. If you would invest  6,462  in The Coca Cola on September 4, 2024 and sell it today you would lose (110.00) from holding The Coca Cola or give up 1.7% of portfolio value over 90 days.

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

The Coca Cola  vs.  Hong Kong Land

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.

Hong Kong Land

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Hong Kong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Hong Kong

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

The idea behind The Coca Cola and Hong Kong Land 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 Stocks Directory module to find actively traded stocks across global markets.