Correlation Between Coca Cola and MDA

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

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

Diversification Opportunities for Coca Cola and MDA

-0.51

Correlation Coefficient

Coca Cola  MDA

Excellent diversification

The 3 months correlation between Coca and MDA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola CDR and MDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDA 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 CDR are associated (or correlated) with MDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDA has no effect on the direction of Coca Cola i.e., Coca Cola and MDA go up and down completely randomly.

Pair Corralation between Coca Cola and MDA

Assuming the 90 days trading horizon Coca Cola CDR is expected to under-perform the MDA. But the stock apears to be less risky and, when comparing its historical volatility, Coca Cola CDR is 2.86 times less risky than MDA. The stock trades about -0.04 of its potential returns per unit of risk. The MDA is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  2,455  in MDA on April 20, 2025 and sell it today you would earn a total of  1,887  from holding MDA or generate 76.86% return on investment over 90 days.

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

Coca Cola CDR  vs.  MDA

Coca Cola CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coca Cola CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Coca Cola is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

MDA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MDA are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MDA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and MDA

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

The idea behind Coca Cola CDR and MDA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.