Correlation Between Seaboard and Coca-Cola European

Can any of the company-specific risk be diversified away by investing in both Seaboard and Coca-Cola European 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 Seaboard and Coca-Cola European into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seaboard and Coca Cola European Partners, you can compare the effects of market volatilities on Seaboard and Coca-Cola European 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 Seaboard with a short position of Coca-Cola European. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seaboard and Coca-Cola European.

Diversification Opportunities for Seaboard and Coca-Cola European

-0.64

Correlation Coefficient

Seaboard  Coca-Cola European

Excellent diversification

The 3 months correlation between Seaboard and Coca-Cola is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Seaboard and Coca Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola European and Seaboard 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 Seaboard are associated (or correlated) with Coca-Cola European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola European has no effect on the direction of Seaboard i.e., Seaboard and Coca-Cola European go up and down completely randomly.

Pair Corralation between Seaboard and Coca-Cola European

Assuming the 90 days horizon Seaboard is expected to under-perform the Coca-Cola European. But the stock apears to be less risky and, when comparing its historical volatility, Seaboard is 1.29 times less risky than Coca-Cola European. The stock trades about -0.21 of its potential returns per unit of risk. The Coca Cola European Partners is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,979  in Coca Cola European Partners on September 27, 2024 and sell it today you would earn a total of  351.00  from holding Coca Cola European Partners or generate 5.03% return on investment over 90 days.

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

Seaboard  vs.  Coca Cola European Partners

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Coca Cola European

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Coca-Cola European is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Seaboard and Coca-Cola European

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

The idea behind Seaboard and Coca Cola European Partners 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.