Correlation Between Coca Cola and TRANSCANADA

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

Diversification Opportunities for Coca Cola and TRANSCANADA

0.54

Correlation Coefficient

Coca Cola  TRANSCANADA

Very weak diversification

The 3 months correlation between Coca and TRANSCANADA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and TRANSCANADA PIPELINES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRANSCANADA PIPELINES LTD 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 TRANSCANADA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRANSCANADA PIPELINES LTD has no effect on the direction of Coca Cola i.e., Coca Cola and TRANSCANADA go up and down completely randomly.

Pair Corralation between Coca Cola and TRANSCANADA

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the TRANSCANADA. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 2.32 times less risky than TRANSCANADA. The stock trades about -0.22 of its potential returns per unit of risk. The TRANSCANADA PIPELINES LTD is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10,576  in TRANSCANADA PIPELINES LTD on August 31, 2024 and sell it today you would lose (51.00) from holding TRANSCANADA PIPELINES LTD or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.3%
Values	Daily Returns

The Coca Cola  vs.  TRANSCANADA PIPELINES LTD

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.

TRANSCANADA PIPELINES LTD

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Coca Cola and TRANSCANADA

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

The idea behind The Coca Cola and TRANSCANADA PIPELINES LTD 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.