Correlation Between Coca Cola and Jackpot Digital

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

Diversification Opportunities for Coca Cola and Jackpot Digital

0.72

Correlation Coefficient

Coca Cola  Jackpot Digital

Poor diversification

The 3 months correlation between Coca and Jackpot is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Jackpot Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jackpot Digital 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 Jackpot Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jackpot Digital has no effect on the direction of Coca Cola i.e., Coca Cola and Jackpot Digital go up and down completely randomly.

Pair Corralation between Coca Cola and Jackpot Digital

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Jackpot Digital. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 6.89 times less risky than Jackpot Digital. The stock trades about -0.23 of its potential returns per unit of risk. The Jackpot Digital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4.80  in Jackpot Digital on September 8, 2024 and sell it today you would lose (0.10) from holding Jackpot Digital or give up 2.08% 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.  Jackpot Digital

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.

Jackpot Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jackpot Digital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Jackpot Digital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Coca Cola and Jackpot Digital

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

The idea behind The Coca Cola and Jackpot Digital 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.