Correlation Between Dodge Cox and Coca Cola

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

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

Diversification Opportunities for Dodge Cox and Coca Cola

0.51

Correlation Coefficient

Dodge Cox  Coca Cola

Very weak diversification

The 3 months correlation between Dodge and Coca is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Cox Stock and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated and Dodge Cox 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 Dodge Cox Stock 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 Consolidated has no effect on the direction of Dodge Cox i.e., Dodge Cox and Coca Cola go up and down completely randomly.

Pair Corralation between Dodge Cox and Coca Cola

Assuming the 90 days horizon Dodge Cox is expected to generate 6.7 times less return on investment than Coca Cola. But when comparing it to its historical volatility, Dodge Cox Stock is 2.71 times less risky than Coca Cola. It trades about 0.08 of its potential returns per unit of risk. Coca Cola Consolidated is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  98,840  in Coca Cola Consolidated on March 29, 2024 and sell it today you would earn a total of  7,427  from holding Coca Cola Consolidated or generate 7.51% return on investment over 90 days.

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

Dodge Cox Stock  vs.  Coca Cola Consolidated

Dodge Cox Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dodge Cox Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Dodge Cox is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola Consolidated

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Consolidated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, Coca Cola exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dodge Cox and Coca Cola

The main advantage of trading using opposite Dodge Cox and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dodge Cox 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 Dodge Cox Stock and Coca Cola Consolidated 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.