Correlation Between Koninklijke KPN and Nippon Telegraph
Can any of the company-specific risk be diversified away by investing in both Koninklijke KPN and Nippon Telegraph 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 Koninklijke KPN and Nippon Telegraph into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Koninklijke KPN NV and Nippon Telegraph and, you can compare the effects of market volatilities on Koninklijke KPN and Nippon Telegraph 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 Koninklijke KPN with a short position of Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke KPN and Nippon Telegraph.
Diversification Opportunities for Koninklijke KPN and Nippon Telegraph
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Koninklijke and Nippon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and Nippon Telegraph and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph and Koninklijke KPN 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 Koninklijke KPN NV are associated (or correlated) with Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph has no effect on the direction of Koninklijke KPN i.e., Koninklijke KPN and Nippon Telegraph go up and down completely randomly.
Pair Corralation between Koninklijke KPN and Nippon Telegraph
Assuming the 90 days horizon Koninklijke KPN NV is expected to generate 1.31 times more return on investment than Nippon Telegraph. However, Koninklijke KPN is 1.31 times more volatile than Nippon Telegraph and. It trades about 0.17 of its potential returns per unit of risk. Nippon Telegraph and is currently generating about 0.18 per unit of risk. If you would invest 308.00 in Koninklijke KPN NV on September 3, 2024 and sell it today you would earn a total of 26.00 from holding Koninklijke KPN NV or generate 8.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Koninklijke KPN NV vs. Nippon Telegraph and
Performance |
| Timeline |
| Koninklijke KPN NV |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Nippon Telegraph |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Koninklijke KPN and Nippon Telegraph Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Koninklijke KPN and Nippon Telegraph
The main advantage of trading using opposite Koninklijke KPN and Nippon Telegraph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke KPN position performs unexpectedly, Nippon Telegraph 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 Nippon Telegraph will offset losses from the drop in Nippon Telegraph's long position.| Koninklijke KPN vs. Pegasus Tel | Koninklijke KPN vs. SwissCom AG | Koninklijke KPN vs. Hellenic Telecommunications Org | Koninklijke KPN vs. KonaTel |
| Nippon Telegraph vs. Liberty Broadband Srs | Nippon Telegraph vs. Cogent Communications Group | Nippon Telegraph vs. SK Telecom Co | Nippon Telegraph vs. SwissCom AG |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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