Correlation Between Deutsche Telekom and NIKKON HOLDINGS

Can any of the company-specific risk be diversified away by investing in both Deutsche Telekom and NIKKON HOLDINGS 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 NIKKON HOLDINGS 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 NIKKON HOLDINGS TD, you can compare the effects of market volatilities on Deutsche Telekom and NIKKON HOLDINGS 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 NIKKON HOLDINGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deutsche Telekom and NIKKON HOLDINGS.

Diversification Opportunities for Deutsche Telekom and NIKKON HOLDINGS

0.68

Correlation Coefficient

Deutsche Telekom  NIKKON HOLDINGS

Poor diversification

The 3 months correlation between Deutsche and NIKKON is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and NIKKON HOLDINGS TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIKKON HOLDINGS TD 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 NIKKON HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIKKON HOLDINGS TD has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and NIKKON HOLDINGS go up and down completely randomly.

Pair Corralation between Deutsche Telekom and NIKKON HOLDINGS

Assuming the 90 days trading horizon Deutsche Telekom is expected to generate 1.07 times less return on investment than NIKKON HOLDINGS. But when comparing it to its historical volatility, Deutsche Telekom AG is 1.52 times less risky than NIKKON HOLDINGS. It trades about 0.1 of its potential returns per unit of risk. NIKKON HOLDINGS TD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  810.00  in NIKKON HOLDINGS TD on October 5, 2024 and sell it today you would earn a total of  420.00  from holding NIKKON HOLDINGS TD or generate 51.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Deutsche Telekom AG  vs.  NIKKON HOLDINGS TD

Deutsche Telekom

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Deutsche Telekom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain technical and fundamental indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NIKKON HOLDINGS TD

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days NIKKON HOLDINGS TD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NIKKON HOLDINGS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Telekom and NIKKON HOLDINGS

The main advantage of trading using opposite Deutsche Telekom and NIKKON HOLDINGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, NIKKON HOLDINGS 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 NIKKON HOLDINGS will offset losses from the drop in NIKKON HOLDINGS's long position.

The idea behind Deutsche Telekom AG and NIKKON HOLDINGS TD 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.