Correlation Between Coca Cola and Safety Shot

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

Diversification Opportunities for Coca Cola and Safety Shot

0.71

Correlation Coefficient

Coca Cola  Safety Shot

Poor diversification

The 3 months correlation between Coca and Safety is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Safety Shot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Shot 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 Safety Shot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Shot has no effect on the direction of Coca Cola i.e., Coca Cola and Safety Shot go up and down completely randomly.

Pair Corralation between Coca Cola and Safety Shot

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Safety Shot. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 20.97 times less risky than Safety Shot. The stock trades about -0.23 of its potential returns per unit of risk. The Safety Shot is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Safety Shot on October 1, 2024 and sell it today you would lose (4.00) from holding Safety Shot or give up 18.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

The Coca Cola  vs.  Safety Shot

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Safety Shot

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Shot are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Safety Shot showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and Safety Shot

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

The idea behind The Coca Cola and Safety Shot 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.