Correlation Between Shell PLC and Coca Cola

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

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

Diversification Opportunities for Shell PLC and Coca Cola

-0.75

Correlation Coefficient

Shell PLC  Coca Cola

Pay attention - limited upside

The 3 months correlation between Shell and Coca is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shell PLC and Coca Cola Europacific Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Europacific and Shell PLC 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 Shell PLC 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 Europacific has no effect on the direction of Shell PLC i.e., Shell PLC and Coca Cola go up and down completely randomly.

Pair Corralation between Shell PLC and Coca Cola

Assuming the 90 days trading horizon Shell PLC is expected to under-perform the Coca Cola. In addition to that, Shell PLC is 1.16 times more volatile than Coca Cola Europacific Partners. It trades about -0.16 of its total potential returns per unit of risk. Coca Cola Europacific Partners is currently generating about 0.14 per unit of volatility. If you would invest  7,050  in Coca Cola Europacific Partners on June 23, 2024 and sell it today you would earn a total of  220.00  from holding Coca Cola Europacific Partners or generate 3.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Shell PLC  vs.  Coca Cola Europacific Partners

Shell PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shell PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shell PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Coca Cola Europacific

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Europacific Partners are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Shell PLC and Coca Cola

The main advantage of trading using opposite Shell PLC and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shell PLC 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 Shell PLC and Coca Cola Europacific 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.