Correlation Between Coca Cola and Emerging Markets

Can any of the company-specific risk be diversified away by investing in both Coca Cola and Emerging Markets 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 Emerging Markets 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 Emerging Markets Portfolio, you can compare the effects of market volatilities on Coca Cola and Emerging Markets 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 Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Emerging Markets.

Diversification Opportunities for Coca Cola and Emerging Markets

0.4

Correlation Coefficient

Coca Cola  Emerging Markets

Very weak diversification

The 3 months correlation between Coca and Emerging is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and Emerging Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets Por 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 Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets Por has no effect on the direction of Coca Cola i.e., Coca Cola and Emerging Markets go up and down completely randomly.

Pair Corralation between Coca Cola and Emerging Markets

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 1.03 times less return on investment than Emerging Markets. In addition to that, Coca Cola is 1.05 times more volatile than Emerging Markets Portfolio. It trades about 0.1 of its total potential returns per unit of risk. Emerging Markets Portfolio is currently generating about 0.11 per unit of volatility. If you would invest  2,429  in Emerging Markets Portfolio on August 26, 2025 and sell it today you would earn a total of  162.00  from holding Emerging Markets Portfolio or generate 6.67% return on investment over 90 days.

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

The Coca Cola  vs.  Emerging Markets Portfolio

Coca Cola

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Emerging Markets Por

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Markets Portfolio are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Emerging Markets may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Pair Trading with Coca Cola and Emerging Markets

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

The idea behind The Coca Cola and Emerging Markets Portfolio 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.