Correlation Between Molson Coors and Coca Cola

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

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

Diversification Opportunities for Molson Coors and Coca Cola

0.27

Correlation Coefficient

Molson Coors  Coca Cola

Modest diversification

The 3 months correlation between Molson and Coca is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Molson Coors 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 Molson Coors Brewing are associated (or correlated) with Coca Cola. 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 has no effect on the direction of Molson Coors i.e., Molson Coors and Coca Cola go up and down completely randomly.

Pair Corralation between Molson Coors and Coca Cola

Considering the 90-day investment horizon Molson Coors is expected to generate 7.93 times less return on investment than Coca Cola. In addition to that, Molson Coors is 1.48 times more volatile than The Coca Cola. It trades about 0.01 of its total potential returns per unit of risk. The Coca Cola is currently generating about 0.1 per unit of volatility. If you would invest  5,992  in The Coca Cola on January 29, 2024 and sell it today you would earn a total of  182.00  from holding The Coca Cola or generate 3.04% return on investment over 90 days.

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

Molson Coors Brewing  vs.  The Coca Cola

Molson Coors Brewing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Molson Coors Brewing has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Molson Coors is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Coca Cola

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Molson Coors and Coca Cola

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

The idea behind Molson Coors Brewing and The Coca Cola 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.