Correlation Between Telecom Argentina and Coca Cola

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

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

Diversification Opportunities for Telecom Argentina and Coca Cola

-0.89

Correlation Coefficient

Telecom Argentina  Coca Cola

Pay attention - limited upside

The 3 months correlation between Telecom and Coca is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Argentina and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Telecom Argentina 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 Telecom Argentina 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 Telecom Argentina i.e., Telecom Argentina and Coca Cola go up and down completely randomly.

Pair Corralation between Telecom Argentina and Coca Cola

Assuming the 90 days trading horizon Telecom Argentina is expected to generate 1.52 times more return on investment than Coca Cola. However, Telecom Argentina is 1.52 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 0.06 per unit of risk. If you would invest  134,065  in Telecom Argentina on September 14, 2024 and sell it today you would earn a total of  162,935  from holding Telecom Argentina or generate 121.53% return on investment over 90 days.

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

Telecom Argentina  vs.  The Coca Cola

Telecom Argentina

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Argentina are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Telecom Argentina sustained solid returns over the last few months and may actually be approaching a breakup point.

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. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Telecom Argentina and Coca Cola

The main advantage of trading using opposite Telecom Argentina and Coca Cola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Argentina 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 Telecom Argentina 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.