Correlation Between ATT and Deutsche Telekom
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Deutsche Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Deutsche Telekom AG, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Deutsche Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Deutsche Telekom.
Diversification Opportunities for ATT and Deutsche Telekom
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ATT and Deutsche is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and ATT 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 ATT Inc 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 ATT i.e., ATT and Deutsche Telekom go up and down completely randomly.
Pair Corralation between ATT and Deutsche Telekom
Assuming the 90 days trading horizon ATT Inc is expected to generate 1.3 times more return on investment than Deutsche Telekom. However, ATT is 1.3 times more volatile than Deutsche Telekom AG. It trades about 0.28 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.18 per unit of risk. If you would invest 2,034 in ATT Inc on August 27, 2024 and sell it today you would earn a total of 168.00 from holding ATT Inc or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Deutsche Telekom AG
Performance |
| Timeline |
| ATT Inc |
| Deutsche Telekom |
ATT and Deutsche Telekom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Deutsche Telekom
The main advantage of trading using opposite ATT and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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