Correlation Between Deutsche Telekom and SIERRA MADRE

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

Diversification Opportunities for Deutsche Telekom and SIERRA MADRE

0.45

Correlation Coefficient

Deutsche Telekom  SIERRA MADRE

Very weak diversification

The 3 months correlation between Deutsche and SIERRA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and SIERRA MADRE GOLD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIERRA MADRE GOLD 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 SIERRA MADRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIERRA MADRE GOLD has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and SIERRA MADRE go up and down completely randomly.

Pair Corralation between Deutsche Telekom and SIERRA MADRE

Assuming the 90 days trading horizon Deutsche Telekom is expected to generate 1.63 times less return on investment than SIERRA MADRE. But when comparing it to its historical volatility, Deutsche Telekom AG is 5.16 times less risky than SIERRA MADRE. It trades about 0.18 of its potential returns per unit of risk. SIERRA MADRE GOLD is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  35.00  in SIERRA MADRE GOLD on December 24, 2024 and sell it today you would earn a total of  3.00  from holding SIERRA MADRE GOLD or generate 8.57% return on investment over 90 days.

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

Deutsche Telekom AG  vs.  SIERRA MADRE GOLD

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 uncertain technical and fundamental indicators, Deutsche Telekom unveiled solid returns over the last few months and may actually be approaching a breakup point.

SIERRA MADRE GOLD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIERRA MADRE GOLD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIERRA MADRE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Telekom and SIERRA MADRE

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

The idea behind Deutsche Telekom AG and SIERRA MADRE GOLD 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.