Correlation Between Coca Cola and CONOCOPHILLIPS

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

Diversification Opportunities for Coca Cola and CONOCOPHILLIPS

0.07

Correlation Coefficient

Coca Cola  CONOCOPHILLIPS

Significant diversification

The 3 months correlation between Coca and CONOCOPHILLIPS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and CONOCOPHILLIPS CDA FDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONOCOPHILLIPS CDA FDG 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 CONOCOPHILLIPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONOCOPHILLIPS CDA FDG has no effect on the direction of Coca Cola i.e., Coca Cola and CONOCOPHILLIPS go up and down completely randomly.

Pair Corralation between Coca Cola and CONOCOPHILLIPS

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the CONOCOPHILLIPS. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 1.11 times less risky than CONOCOPHILLIPS. The stock trades about -0.23 of its potential returns per unit of risk. The CONOCOPHILLIPS CDA FDG is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  11,084  in CONOCOPHILLIPS CDA FDG on September 13, 2024 and sell it today you would lose (423.00) from holding CONOCOPHILLIPS CDA FDG or give up 3.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

The Coca Cola  vs.  CONOCOPHILLIPS CDA FDG

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.

CONOCOPHILLIPS CDA FDG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONOCOPHILLIPS CDA FDG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONOCOPHILLIPS CDA FDG investors.

Pair Trading with Coca Cola and CONOCOPHILLIPS

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

The idea behind The Coca Cola and CONOCOPHILLIPS CDA FDG 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.