Correlation Between T-Mobile and Danone SA

Can any of the company-specific risk be diversified away by investing in both T-Mobile and Danone SA 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 T-Mobile and Danone SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T Mobile and Danone SA, you can compare the effects of market volatilities on T-Mobile and Danone SA 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 T-Mobile with a short position of Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of T-Mobile and Danone SA.

Diversification Opportunities for T-Mobile and Danone SA

0.75

Correlation Coefficient

T-Mobile  Danone SA

Poor diversification

The 3 months correlation between T-Mobile and Danone is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone SA and T-Mobile 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 T Mobile are associated (or correlated) with Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of T-Mobile i.e., T-Mobile and Danone SA go up and down completely randomly.

Pair Corralation between T-Mobile and Danone SA

Assuming the 90 days horizon T Mobile is expected to generate 2.06 times more return on investment than Danone SA. However, T-Mobile is 2.06 times more volatile than Danone SA. It trades about 0.09 of its potential returns per unit of risk. Danone SA is currently generating about 0.16 per unit of risk. If you would invest  23,210  in T Mobile on November 29, 2024 and sell it today you would earn a total of  2,380  from holding T Mobile or generate 10.25% return on investment over 90 days.

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

T Mobile  vs.  Danone SA

T Mobile

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, T-Mobile may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Danone SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danone SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Danone SA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with T-Mobile and Danone SA

The main advantage of trading using opposite T-Mobile and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-Mobile position performs unexpectedly, Danone SA 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 Danone SA will offset losses from the drop in Danone SA's long position.

The idea behind T Mobile and Danone SA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.