Correlation Between Coca Cola and MicroAlgo

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

By analyzing existing cross correlation between Coca Cola Consolidated and MicroAlgo, you can compare the effects of market volatilities on Coca Cola and MicroAlgo 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 MicroAlgo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and MicroAlgo.

Diversification Opportunities for Coca Cola and MicroAlgo

0.55

Correlation Coefficient

Coca Cola  MicroAlgo

Very weak diversification

The 3 months correlation between Coca and MicroAlgo is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Consolidated and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo 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 Coca Cola Consolidated are associated (or correlated) with MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of Coca Cola i.e., Coca Cola and MicroAlgo go up and down completely randomly.

Pair Corralation between Coca Cola and MicroAlgo

Given the investment horizon of 90 days Coca Cola is expected to generate 80.41 times less return on investment than MicroAlgo. But when comparing it to its historical volatility, Coca Cola Consolidated is 89.93 times less risky than MicroAlgo. It trades about 0.28 of its potential returns per unit of risk. MicroAlgo is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  156.00  in MicroAlgo on April 4, 2024 and sell it today you would earn a total of  918.00  from holding MicroAlgo or generate 588.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Coca Cola Consolidated  vs.  MicroAlgo

Coca Cola Consolidated

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Consolidated are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward-looking signals, Coca Cola exhibited solid returns over the last few months and may actually be approaching a breakup point.

MicroAlgo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and MicroAlgo

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

The idea behind Coca Cola Consolidated and MicroAlgo 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.