Correlation Between Deutsche Telekom and Coca Cola

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

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

Diversification Opportunities for Deutsche Telekom and Coca Cola

-0.6

Correlation Coefficient

Deutsche Telekom  Coca Cola

Excellent diversification

The 3 months correlation between Deutsche and Coca is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Deutsche Telekom 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 Deutsche Telekom AG 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 has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Coca Cola go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Coca Cola

Assuming the 90 days trading horizon Deutsche Telekom AG is expected to generate 1.11 times more return on investment than Coca Cola. However, Deutsche Telekom is 1.11 times more volatile than The Coca Cola. It trades about 0.1 of its potential returns per unit of risk. The Coca Cola is currently generating about 0.03 per unit of risk. If you would invest  1,927  in Deutsche Telekom AG on October 5, 2024 and sell it today you would earn a total of  990.00  from holding Deutsche Telekom AG or generate 51.38% return on investment over 90 days.

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

Deutsche Telekom AG  vs.  The Coca Cola

Deutsche Telekom

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Deutsche Telekom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain technical and fundamental indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Coca Cola is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Deutsche Telekom and Coca Cola

The main advantage of trading using opposite Deutsche Telekom and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom 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 Deutsche Telekom AG and The Coca Cola 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.