Correlation Between Safety Shot and Coca Cola

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

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

Diversification Opportunities for Safety Shot and Coca Cola

0.27

Correlation Coefficient

Safety Shot  Coca Cola

Modest diversification

The 3 months correlation between Safety and Coca is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Safety Shot and Coca Cola Femsa SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Femsa and Safety Shot 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 Safety Shot 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 Femsa has no effect on the direction of Safety Shot i.e., Safety Shot and Coca Cola go up and down completely randomly.

Pair Corralation between Safety Shot and Coca Cola

Assuming the 90 days horizon Safety Shot is expected to generate 16.71 times more return on investment than Coca Cola. However, Safety Shot is 16.71 times more volatile than Coca Cola Femsa SAB. It trades about 0.12 of its potential returns per unit of risk. Coca Cola Femsa SAB is currently generating about 0.17 per unit of risk. If you would invest  43.00  in Safety Shot on January 31, 2024 and sell it today you would earn a total of  3.00  from holding Safety Shot or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Safety Shot  vs.  Coca Cola Femsa SAB

Safety Shot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Shot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Safety Shot is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Coca Cola Femsa

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Femsa SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Safety Shot and Coca Cola

The main advantage of trading using opposite Safety Shot and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Safety Shot 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 Safety Shot and Coca Cola Femsa SAB 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .