Correlation Between Coca Cola and Laird Superfood

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

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

Diversification Opportunities for Coca Cola and Laird Superfood

-0.39

Correlation Coefficient

Coca Cola  Laird Superfood

Very good diversification

The 3 months correlation between Coca and Laird is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Laird Superfood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laird Superfood 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 The Coca Cola are associated (or correlated) with Laird Superfood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laird Superfood has no effect on the direction of Coca Cola i.e., Coca Cola and Laird Superfood go up and down completely randomly.

Pair Corralation between Coca Cola and Laird Superfood

Allowing for the 90-day total investment horizon The Coca Cola is expected to generate 0.26 times more return on investment than Laird Superfood. However, The Coca Cola is 3.81 times less risky than Laird Superfood. It trades about 0.11 of its potential returns per unit of risk. Laird Superfood is currently generating about 0.02 per unit of risk. If you would invest  6,094  in The Coca Cola on February 14, 2025 and sell it today you would earn a total of  1,067  from holding The Coca Cola or generate 17.51% return on investment over 90 days.

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

The Coca Cola  vs.  Laird Superfood

Coca Cola

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 4 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

Laird Superfood

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Laird Superfood are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Laird Superfood may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Coca Cola and Laird Superfood

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

The idea behind The Coca Cola and Laird Superfood 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.