Correlation Between Coca Cola and Touchmark Bancshares

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

Diversification Opportunities for Coca Cola and Touchmark Bancshares

0.78

Correlation Coefficient

Coca Cola  Touchmark Bancshares

Poor diversification

The 3 months correlation between Coca and Touchmark is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Touchmark Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchmark Bancshares 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 Touchmark Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchmark Bancshares has no effect on the direction of Coca Cola i.e., Coca Cola and Touchmark Bancshares go up and down completely randomly.

Pair Corralation between Coca Cola and Touchmark Bancshares

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Touchmark Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.55 times less risky than Touchmark Bancshares. The stock trades about -0.23 of its potential returns per unit of risk. The Touchmark Bancshares is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  904.00  in Touchmark Bancshares on September 18, 2024 and sell it today you would lose (97.00) from holding Touchmark Bancshares or give up 10.73% 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.  Touchmark Bancshares

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 fragile 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.

Touchmark Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchmark Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Coca Cola and Touchmark Bancshares

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

The idea behind The Coca Cola and Touchmark Bancshares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.