Correlation Between Coca Cola and Valens

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

Diversification Opportunities for Coca Cola and Valens

0.36

Correlation Coefficient

Coca Cola  Valens

Weak diversification

The 3 months correlation between Coca and Valens is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of Coca Cola i.e., Coca Cola and Valens go up and down completely randomly.

Pair Corralation between Coca Cola and Valens

Allowing for the 90-day total investment horizon The Coca Cola is expected to under-perform the Valens. But the stock apears to be less risky and, when comparing its historical volatility, The Coca Cola is 6.32 times less risky than Valens. The stock trades about -0.11 of its potential returns per unit of risk. The Valens is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Valens on September 24, 2024 and sell it today you would earn a total of  4.00  from holding Valens or generate 2.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Coca Cola  vs.  Valens

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.

Valens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Coca Cola and Valens

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

The idea behind The Coca Cola and Valens 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.