Correlation Between Meta CDR and Coca Cola

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

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

Diversification Opportunities for Meta CDR and Coca Cola

-0.66

Correlation Coefficient

Meta CDR  Coca Cola

Excellent diversification

The 3 months correlation between Meta and Coca is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Meta CDR and Coca Cola CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola CDR and Meta CDR 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 Meta CDR 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 CDR has no effect on the direction of Meta CDR i.e., Meta CDR and Coca Cola go up and down completely randomly.

Pair Corralation between Meta CDR and Coca Cola

Assuming the 90 days trading horizon Meta CDR is expected to generate 1.92 times more return on investment than Coca Cola. However, Meta CDR is 1.92 times more volatile than Coca Cola CDR. It trades about 0.31 of its potential returns per unit of risk. Coca Cola CDR is currently generating about -0.04 per unit of risk. If you would invest  2,664  in Meta CDR on April 20, 2025 and sell it today you would earn a total of  1,194  from holding Meta CDR or generate 44.82% return on investment over 90 days.

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

Meta CDR  vs.  Coca Cola CDR

Meta CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meta CDR are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Meta CDR displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Meta CDR and Coca Cola

The main advantage of trading using opposite Meta CDR and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta CDR 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 Meta CDR and Coca Cola CDR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.