Correlation Between Deutsche Telekom and Koninklijke KPN
Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and Koninklijke KPN 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 Koninklijke KPN 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 Koninklijke KPN NV, you can compare the effects of market volatilities on Deutsche Telekom and Koninklijke KPN 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 Koninklijke KPN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and Koninklijke KPN.
Diversification Opportunities for Deutsche Telekom and Koninklijke KPN
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Deutsche and Koninklijke is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Koninklijke KPN NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke KPN NV 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 Koninklijke KPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke KPN NV has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Koninklijke KPN go up and down completely randomly.
Pair Corralation between Deutsche Telekom and Koninklijke KPN
Assuming the 90 days horizon Deutsche Telekom AG is expected to generate 0.95 times more return on investment than Koninklijke KPN. However, Deutsche Telekom AG is 1.06 times less risky than Koninklijke KPN. It trades about 0.19 of its potential returns per unit of risk. Koninklijke KPN NV is currently generating about 0.06 per unit of risk. If you would invest 2,064 in Deutsche Telekom AG on November 28, 2024 and sell it today you would earn a total of 1,436 from holding Deutsche Telekom AG or generate 69.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
Deutsche Telekom AG vs. Koninklijke KPN NV
Performance |
| Timeline |
| Deutsche Telekom |
| Koninklijke KPN NV |
Deutsche Telekom and Koninklijke KPN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Telekom and Koninklijke KPN
The main advantage of trading using opposite Deutsche Telekom and Koninklijke KPN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, Koninklijke KPN 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 Koninklijke KPN will offset losses from the drop in Koninklijke KPN's long position.| Deutsche Telekom vs. PICKN PAY STORES | Deutsche Telekom vs. Japan Asia Investment | Deutsche Telekom vs. New Residential Investment | Deutsche Telekom vs. AEON STORES |
| Koninklijke KPN vs. CAREER EDUCATION | Koninklijke KPN vs. China Medical System | Koninklijke KPN vs. BRIT AMER TOBACCO | Koninklijke KPN vs. British American Tobacco |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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