Correlation Between Coca Cola and IShares Convertible

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

Diversification Opportunities for Coca Cola and IShares Convertible

-0.84

Correlation Coefficient

Coca Cola  IShares Convertible

Pay attention - limited upside

The 3 months correlation between Coca and IShares is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and iShares Convertible Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Convertible Bond 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 IShares Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Convertible Bond has no effect on the direction of Coca Cola i.e., Coca Cola and IShares Convertible go up and down completely randomly.

Pair Corralation between Coca Cola and IShares Convertible

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the IShares Convertible. In addition to that, Coca Cola is 1.83 times more volatile than iShares Convertible Bond. It trades about -0.2 of its total potential returns per unit of risk. iShares Convertible Bond is currently generating about 0.32 per unit of volatility. If you would invest  8,038  in iShares Convertible Bond on September 12, 2024 and sell it today you would earn a total of  786.00  from holding iShares Convertible Bond or generate 9.78% return on investment over 90 days.

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

The Coca Cola  vs.  iShares Convertible Bond

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.

iShares Convertible Bond

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Convertible Bond are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, IShares Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coca Cola and IShares Convertible

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

The idea behind The Coca Cola and iShares Convertible Bond 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.