Correlation Between Coca Cola and NATIONAL

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

Diversification Opportunities for Coca Cola and NATIONAL

-0.35

Correlation Coefficient

Coca Cola  NATIONAL

Very good diversification

The 3 months correlation between Coca and NATIONAL is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and NATIONAL AUSTRALIA BK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL AUSTRALIA 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 NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL AUSTRALIA has no effect on the direction of Coca Cola i.e., Coca Cola and NATIONAL go up and down completely randomly.

Pair Corralation between Coca Cola and NATIONAL

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the NATIONAL. In addition to that, Coca Cola is 2.43 times more volatile than NATIONAL AUSTRALIA BK. It trades about -0.19 of its total potential returns per unit of risk. NATIONAL AUSTRALIA BK is currently generating about -0.2 per unit of volatility. If you would invest  9,919  in NATIONAL AUSTRALIA BK on September 19, 2024 and sell it today you would lose (233.00) from holding NATIONAL AUSTRALIA BK or give up 2.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.0%
Values	Daily Returns

The Coca Cola  vs.  NATIONAL AUSTRALIA BK

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 fragile 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.

NATIONAL AUSTRALIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL AUSTRALIA BK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NATIONAL is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Coca Cola and NATIONAL

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

The idea behind The Coca Cola and NATIONAL AUSTRALIA BK 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.