Correlation Between Coca Cola and Macquariefirst

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

Diversification Opportunities for Coca Cola and Macquariefirst

-0.95

Correlation Coefficient

Coca Cola  Macquariefirst

Pay attention - limited upside

The 3 months correlation between Coca and Macquariefirst is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Macquariefirst Tr Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquariefirst Tr Global 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 Macquariefirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquariefirst Tr Global has no effect on the direction of Coca Cola i.e., Coca Cola and Macquariefirst go up and down completely randomly.

Pair Corralation between Coca Cola and Macquariefirst

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Macquariefirst. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.06 times less risky than Macquariefirst. The stock trades about -0.22 of its potential returns per unit of risk. The Macquariefirst Tr Global is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  843.00  in Macquariefirst Tr Global on August 31, 2024 and sell it today you would earn a total of  2.00  from holding Macquariefirst Tr Global or generate 0.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	23.81%
Values	Daily Returns

The Coca Cola  vs.  Macquariefirst Tr Global

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.

Macquariefirst Tr Global

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Macquariefirst Tr Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, Macquariefirst is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Coca Cola and Macquariefirst

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

The idea behind The Coca Cola and Macquariefirst Tr Global 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.