Correlation Between Deutsche Telekom and Bank of America
Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and Bank of America 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 Bank of America 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 Verizon Communications, you can compare the effects of market volatilities on Deutsche Telekom and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and Bank of America.
Diversification Opportunities for Deutsche Telekom and Bank of America
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Deutsche and Bank is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Bank of America go up and down completely randomly.
Pair Corralation between Deutsche Telekom and Bank of America
Assuming the 90 days trading horizon Deutsche Telekom AG is expected to generate 0.68 times more return on investment than Bank of America. However, Deutsche Telekom AG is 1.47 times less risky than Bank of America. It trades about 0.22 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.05 per unit of risk. If you would invest 2,431 in Deutsche Telekom AG on October 19, 2024 and sell it today you would earn a total of 600.00 from holding Deutsche Telekom AG or generate 24.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Deutsche Telekom AG vs. Verizon Communications
Performance |
| Timeline |
| Deutsche Telekom |
| Verizon Communications |
Deutsche Telekom and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Telekom and Bank of America
The main advantage of trading using opposite Deutsche Telekom and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Deutsche Telekom vs. Chunghwa Telecom Co | Deutsche Telekom vs. Molina Healthcare | Deutsche Telekom vs. MPH Health Care | Deutsche Telekom vs. Siemens Healthineers AG |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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