Correlation Between Deutsche Telekom and Option Care

Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and Option Care 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 Option Care 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 Option Care Health, you can compare the effects of market volatilities on Deutsche Telekom and Option Care 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 Option Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and Option Care.

Diversification Opportunities for Deutsche Telekom and Option Care

-0.41

Correlation Coefficient

Deutsche Telekom  Option Care

Very good diversification

The 3 months correlation between Deutsche and Option is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Option Care Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Option Care Health 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 Option Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Option Care Health has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Option Care go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Option Care

Assuming the 90 days trading horizon Deutsche Telekom AG is expected to generate 0.26 times more return on investment than Option Care. However, Deutsche Telekom AG is 3.79 times less risky than Option Care. It trades about 0.13 of its potential returns per unit of risk. Option Care Health is currently generating about -0.04 per unit of risk. If you would invest  2,714  in Deutsche Telekom AG on October 11, 2024 and sell it today you would earn a total of  195.00  from holding Deutsche Telekom AG or generate 7.18% return on investment over 90 days.

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

Deutsche Telekom AG  vs.  Option Care Health

Deutsche Telekom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Option Care Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Option Care Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Deutsche Telekom and Option Care

The main advantage of trading using opposite Deutsche Telekom and Option Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, Option Care 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 Option Care will offset losses from the drop in Option Care's long position.

The idea behind Deutsche Telekom AG and Option Care Health 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.