Correlation Between Deutsche Telekom and Nib Holdings

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

Diversification Opportunities for Deutsche Telekom and Nib Holdings

0.81

Correlation Coefficient

Deutsche Telekom  Nib Holdings

Very poor diversification

The 3 months correlation between Deutsche and Nib is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and nib holdings limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nib holdings limited 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 Nib Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nib holdings limited has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Nib Holdings go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Nib Holdings

Assuming the 90 days trading horizon Deutsche Telekom is expected to generate 1.16 times less return on investment than Nib Holdings. But when comparing it to its historical volatility, Deutsche Telekom AG is 1.67 times less risky than Nib Holdings. It trades about 0.17 of its potential returns per unit of risk. nib holdings limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  314.00  in nib holdings limited on December 21, 2024 and sell it today you would earn a total of  54.00  from holding nib holdings limited or generate 17.2% return on investment over 90 days.

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

Deutsche Telekom AG  vs.  nib holdings limited

Deutsche Telekom

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Deutsche Telekom unveiled solid returns over the last few months and may actually be approaching a breakup point.

nib holdings limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in nib holdings limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Nib Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Telekom and Nib Holdings

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

The idea behind Deutsche Telekom AG and nib holdings limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.