We might also graph the joint distribution of what Coke's daily return was yesterday against what Pepsi's return is today, in the hopes that we can generate an actively-managed portfolio that buys and sells Pepsi based on Coke's conditional return (click to enlarge):
No such luck. The two are slightly negatively correlated, with a slope of 0.01% return and an insignificant coefficient (even without correcting for serial correlation). Note that while concurrent returns are moderately positively correlated, the two have no forecasting power for one another.
Entertaining.
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