Correlation Between Telefonica and Deutsche Telekom
Can any of the company-specific risk be diversified away by investing in both Telefonica 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 Telefonica and Deutsche Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonica SA ADR and Deutsche Telekom AG, you can compare the effects of market volatilities on Telefonica 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 Telefonica with a short position of Deutsche Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonica and Deutsche Telekom.
Diversification Opportunities for Telefonica and Deutsche Telekom
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Telefonica and Deutsche is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Telefonica SA ADR and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and Telefonica 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 Telefonica SA ADR 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 Telefonica i.e., Telefonica and Deutsche Telekom go up and down completely randomly.
Pair Corralation between Telefonica and Deutsche Telekom
Considering the 90-day investment horizon Telefonica SA ADR is expected to generate 1.13 times more return on investment than Deutsche Telekom. However, Telefonica is 1.13 times more volatile than Deutsche Telekom AG. It trades about 0.06 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.05 per unit of risk. If you would invest 316.00 in Telefonica SA ADR on August 23, 2024 and sell it today you would earn a total of 127.00 from holding Telefonica SA ADR or generate 40.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 32.06% |
| Values | Daily Returns |
Telefonica SA ADR vs. Deutsche Telekom AG
Performance |
| Timeline |
| Telefonica SA ADR |
| Deutsche Telekom |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Telefonica and Deutsche Telekom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonica and Deutsche Telekom
The main advantage of trading using opposite Telefonica and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonica 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.| Telefonica vs. Orange SA ADR | Telefonica vs. SK Telecom Co | Telefonica vs. America Movil SAB | Telefonica vs. KT Corporation |
| Deutsche Telekom vs. KDDI Corp PK | Deutsche Telekom vs. Nippon Telegraph Telephone | Deutsche Telekom vs. Softbank Group Corp | Deutsche Telekom vs. KT Corporation |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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