Correlation Between Bank of America and Deutsche Telekom
Can any of the company-specific risk be diversified away by investing in both Bank of America and Deutsche Telekom 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 Bank of America and Deutsche Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Deutsche Telekom AG, you can compare the effects of market volatilities on Bank of America and Deutsche Telekom 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 Bank of America with a short position of Deutsche Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Deutsche Telekom.
Diversification Opportunities for Bank of America and Deutsche Telekom
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Deutsche is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and Bank of America 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 Verizon Communications are associated (or correlated) with Deutsche Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Telekom has no effect on the direction of Bank of America i.e., Bank of America and Deutsche Telekom go up and down completely randomly.
Pair Corralation between Bank of America and Deutsche Telekom
Assuming the 90 days horizon Verizon Communications is expected to generate 0.55 times more return on investment than Deutsche Telekom. However, Verizon Communications is 1.81 times less risky than Deutsche Telekom. It trades about 0.33 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.17 per unit of risk. If you would invest 3,858 in Verizon Communications on September 1, 2024 and sell it today you would earn a total of 342.00 from holding Verizon Communications or generate 8.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Deutsche Telekom AG
Performance |
| Timeline |
| Verizon Communications |
| Deutsche Telekom |
Bank of America and Deutsche Telekom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Deutsche Telekom
The main advantage of trading using opposite Bank of America and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Deutsche Telekom 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 Deutsche Telekom will offset losses from the drop in Deutsche Telekom's long position.| Bank of America vs. Direct Line Insurance | Bank of America vs. Harmony Gold Mining | Bank of America vs. The Hanover Insurance | Bank of America vs. Jacquet Metal Service |
| Deutsche Telekom vs. OFFICE DEPOT | Deutsche Telekom vs. INTERSHOP Communications Aktiengesellschaft | Deutsche Telekom vs. Ribbon Communications | Deutsche Telekom vs. Gamma Communications plc |
Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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