Correlation Between Vita Coco and Coca Cola

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

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

Diversification Opportunities for Vita Coco and Coca Cola

-0.61

Correlation Coefficient

Vita Coco  Coca Cola

Excellent diversification

The 3 months correlation between Vita and Coca is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco 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 Vita Coco 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 Vita Coco 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 Vita Coco i.e., Vita Coco and Coca Cola go up and down completely randomly.

Pair Corralation between Vita Coco and Coca Cola

Given the investment horizon of 90 days Vita Coco is expected to under-perform the Coca Cola. In addition to that, Vita Coco is 2.15 times more volatile than Coca Cola Femsa SAB. It trades about -0.02 of its total potential returns per unit of risk. Coca Cola Femsa SAB is currently generating about 0.2 per unit of volatility. If you would invest  7,576  in Coca Cola Femsa SAB on January 12, 2025 and sell it today you would earn a total of  1,773  from holding Coca Cola Femsa SAB or generate 23.4% return on investment over 90 days.

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

Vita Coco  vs.  Coca Cola Femsa SAB

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Vita Coco is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Coca Cola Femsa

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Femsa SAB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Coca Cola reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vita Coco and Coca Cola

The main advantage of trading using opposite Vita Coco and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco 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 Vita Coco 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.