Correlation Between Deutsche Telekom and Orange SA
Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and Orange SA 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 Orange SA 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 Orange SA ADR, you can compare the effects of market volatilities on Deutsche Telekom and Orange SA 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 Orange SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and Orange SA.
Diversification Opportunities for Deutsche Telekom and Orange SA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Deutsche and Orange is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Orange SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA ADR 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA ADR has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Orange SA go up and down completely randomly.
Pair Corralation between Deutsche Telekom and Orange SA
Assuming the 90 days horizon Deutsche Telekom AG is expected to generate 1.12 times more return on investment than Orange SA. However, Deutsche Telekom is 1.12 times more volatile than Orange SA ADR. It trades about 0.05 of its potential returns per unit of risk. Orange SA ADR is currently generating about 0.04 per unit of risk. If you would invest 2,011 in Deutsche Telekom AG on August 23, 2024 and sell it today you would earn a total of 182.00 from holding Deutsche Telekom AG or generate 9.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 32.06% |
| Values | Daily Returns |
Deutsche Telekom AG vs. Orange SA ADR
Performance |
| Timeline |
| Deutsche Telekom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Orange SA ADR |
Deutsche Telekom and Orange SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Deutsche Telekom and Orange SA
The main advantage of trading using opposite Deutsche Telekom and Orange SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, Orange SA 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 Orange SA will offset losses from the drop in Orange SA's long position.| Deutsche Telekom vs. KDDI Corp PK | Deutsche Telekom vs. Nippon Telegraph Telephone | Deutsche Telekom vs. Softbank Group Corp | Deutsche Telekom vs. KT Corporation |
| Orange SA vs. Telefonica Brasil SA | Orange SA vs. Vodafone Group PLC | Orange SA vs. Grupo Televisa SAB | Orange SA vs. America Movil SAB |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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