Correlation Between Bunge and Coca Cola

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

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

Diversification Opportunities for Bunge and Coca Cola

-0.43

Correlation Coefficient

Bunge  Coca Cola

Very good diversification

The 3 months correlation between Bunge and Coca is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Coca Cola European Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola European and Bunge 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 Bunge Limited 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 European has no effect on the direction of Bunge i.e., Bunge and Coca Cola go up and down completely randomly.

Pair Corralation between Bunge and Coca Cola

Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Coca Cola. In addition to that, Bunge is 1.26 times more volatile than Coca Cola European Partners. It trades about -0.12 of its total potential returns per unit of risk. Coca Cola European Partners is currently generating about 0.12 per unit of volatility. If you would invest  7,371  in Coca Cola European Partners on January 9, 2025 and sell it today you would earn a total of  813.00  from holding Coca Cola European Partners or generate 11.03% return on investment over 90 days.

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

Bunge Limited  vs.  Coca Cola European Partners

Bunge Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Coca Cola European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Bunge and Coca Cola

The main advantage of trading using opposite Bunge and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge 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 Bunge Limited and Coca Cola European Partners 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.