Correlation Between Deutsche Telekom and New Residential
Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and New Residential 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 New Residential 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 New Residential Investment, you can compare the effects of market volatilities on Deutsche Telekom and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and New Residential.
Diversification Opportunities for Deutsche Telekom and New Residential
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Deutsche and New is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and New Residential go up and down completely randomly.
Pair Corralation between Deutsche Telekom and New Residential
Assuming the 90 days trading horizon Deutsche Telekom AG is expected to under-perform the New Residential. But the stock apears to be less risky and, when comparing its historical volatility, Deutsche Telekom AG is 1.78 times less risky than New Residential. The stock trades about -0.24 of its potential returns per unit of risk. The New Residential Investment is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,030 in New Residential Investment on October 10, 2024 and sell it today you would earn a total of 50.00 from holding New Residential Investment or generate 4.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deutsche Telekom AG vs. New Residential Investment
Performance |
| Timeline |
| Deutsche Telekom |
| New Residential Inve |
Deutsche Telekom and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Telekom and New Residential
The main advantage of trading using opposite Deutsche Telekom and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Deutsche Telekom vs. Air Lease | Deutsche Telekom vs. X FAB Silicon Foundries | Deutsche Telekom vs. Sekisui Chemical Co | Deutsche Telekom vs. INDO RAMA SYNTHETIC |
| New Residential vs. Ryohin Keikaku Co | New Residential vs. Deutsche Telekom AG | New Residential vs. BE Semiconductor Industries | New Residential vs. CRAWFORD A NV |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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