Correlation Between JAPAN AIRLINES and Deutsche Telekom

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Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES and Deutsche Telekom 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 JAPAN AIRLINES and Deutsche Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between JAPAN AIRLINES and Deutsche Telekom AG, you can compare the effects of market volatilities on JAPAN AIRLINES and Deutsche Telekom 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 JAPAN AIRLINES with a short position of Deutsche Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and Deutsche Telekom.

Diversification Opportunities for JAPAN AIRLINES and Deutsche Telekom

JAPANDeutscheDiversified AwayJAPANDeutscheDiversified Away100%
0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between JAPAN and Deutsche is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and JAPAN AIRLINES 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 JAPAN AIRLINES are associated (or correlated) with Deutsche Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Telekom has no effect on the direction of JAPAN AIRLINES i.e., JAPAN AIRLINES and Deutsche Telekom go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Deutsche Telekom

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 1.19 times less return on investment than Deutsche Telekom. But when comparing it to its historical volatility, JAPAN AIRLINES is 1.57 times less risky than Deutsche Telekom. It trades about 0.32 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,000  in Deutsche Telekom AG on November 22, 2024 and sell it today you would earn a total of  400.00  from holding Deutsche Telekom AG or generate 13.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

JAPAN AIRLINES  vs.  Deutsche Telekom AG

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50
JavaScript chart by amCharts 3.21.15JAL DTEA
       Timeline  
JAPAN AIRLINES 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, JAPAN AIRLINES may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb14.51515.51616.5
Deutsche Telekom 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Deutsche Telekom reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb28293031323334

JAPAN AIRLINES and Deutsche Telekom Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.91-2.93-1.95-0.970.01.042.093.154.2 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15JAL DTEA
       Returns  

Pair Trading with JAPAN AIRLINES and Deutsche Telekom

The main advantage of trading using opposite JAPAN AIRLINES and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES position performs unexpectedly, Deutsche Telekom 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 Deutsche Telekom will offset losses from the drop in Deutsche Telekom's long position.
The idea behind JAPAN AIRLINES and Deutsche Telekom AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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