Correlation Between Coca Cola and China Teletech

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

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

Diversification Opportunities for Coca Cola and China Teletech

0.72

Correlation Coefficient

Coca Cola  China Teletech

Poor diversification

The 3 months correlation between Coca and China is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and China Teletech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Teletech Holding and Coca Cola 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 The Coca Cola are associated (or correlated) with China Teletech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Teletech Holding has no effect on the direction of Coca Cola i.e., Coca Cola and China Teletech go up and down completely randomly.

Pair Corralation between Coca Cola and China Teletech

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 103.57 times less return on investment than China Teletech. But when comparing it to its historical volatility, The Coca Cola is 103.6 times less risky than China Teletech. It trades about 0.15 of its potential returns per unit of risk. China Teletech Holding is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.09  in China Teletech Holding on December 5, 2024 and sell it today you would earn a total of  20,000  from holding China Teletech Holding or generate 2.222212222E7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

The Coca Cola  vs.  China Teletech Holding

Coca Cola

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Coca Cola may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Teletech Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Teletech Holding are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, China Teletech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coca Cola and China Teletech

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

The idea behind The Coca Cola and China Teletech Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.