Correlation Between Deutsche Telekom and ChemoMetec A/S

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

Diversification Opportunities for Deutsche Telekom and ChemoMetec A/S

0.74

Correlation Coefficient

Deutsche Telekom  ChemoMetec A/S

Poor diversification

The 3 months correlation between Deutsche and ChemoMetec is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and ChemoMetec AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChemoMetec A/S 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 ChemoMetec A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChemoMetec A/S has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and ChemoMetec A/S go up and down completely randomly.

Pair Corralation between Deutsche Telekom and ChemoMetec A/S

Assuming the 90 days trading horizon Deutsche Telekom AG is expected to generate 0.56 times more return on investment than ChemoMetec A/S. However, Deutsche Telekom AG is 1.8 times less risky than ChemoMetec A/S. It trades about 0.16 of its potential returns per unit of risk. ChemoMetec AS is currently generating about 0.05 per unit of risk. If you would invest  2,899  in Deutsche Telekom AG on December 26, 2024 and sell it today you would earn a total of  441.00  from holding Deutsche Telekom AG or generate 15.21% 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.  ChemoMetec AS

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 12 (%) 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.

ChemoMetec A/S

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ChemoMetec AS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ChemoMetec A/S may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Deutsche Telekom and ChemoMetec A/S

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

The idea behind Deutsche Telekom AG and ChemoMetec AS 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.