Correlation Between Deutsche Telekom and GMO Internet
Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and GMO Internet 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 GMO Internet 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 GMO Internet, you can compare the effects of market volatilities on Deutsche Telekom and GMO Internet 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 GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and GMO Internet.
Diversification Opportunities for Deutsche Telekom and GMO Internet
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deutsche and GMO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and GMO Internet go up and down completely randomly.
Pair Corralation between Deutsche Telekom and GMO Internet
Assuming the 90 days horizon Deutsche Telekom is expected to generate 6.02 times less return on investment than GMO Internet. But when comparing it to its historical volatility, Deutsche Telekom AG is 7.95 times less risky than GMO Internet. It trades about 0.1 of its potential returns per unit of risk. GMO Internet is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 255.00 in GMO Internet on October 11, 2024 and sell it today you would earn a total of 1,345 from holding GMO Internet or generate 527.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Deutsche Telekom AG vs. GMO Internet
Performance |
| Timeline |
| Deutsche Telekom |
| GMO Internet |
Deutsche Telekom and GMO Internet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Telekom and GMO Internet
The main advantage of trading using opposite Deutsche Telekom and GMO Internet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, GMO Internet 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 GMO Internet will offset losses from the drop in GMO Internet's long position.| Deutsche Telekom vs. GBS Software AG | Deutsche Telekom vs. Axway Software SA | Deutsche Telekom vs. Guidewire Software | Deutsche Telekom vs. Kingdee International Software |
| GMO Internet vs. SIERRA METALS | GMO Internet vs. Easy Software AG | GMO Internet vs. Axway Software SA | GMO Internet vs. Forsys Metals Corp |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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