Correlation Between Deutsche Telekom and Cape Lambert

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

Diversification Opportunities for Deutsche Telekom and Cape Lambert

0.63

Correlation Coefficient

Deutsche Telekom  Cape Lambert

Poor diversification

The 3 months correlation between Deutsche and Cape is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Cape Lambert Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cape Lambert Resources 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 Cape Lambert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cape Lambert Resources has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Cape Lambert go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Cape Lambert

Assuming the 90 days trading horizon Deutsche Telekom is expected to generate 31.49 times less return on investment than Cape Lambert. But when comparing it to its historical volatility, Deutsche Telekom AG is 52.27 times less risky than Cape Lambert. It trades about 0.1 of its potential returns per unit of risk. Cape Lambert Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.14  in Cape Lambert Resources on October 6, 2024 and sell it today you would earn a total of  2.91  from holding Cape Lambert Resources or generate 2078.57% 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.  Cape Lambert Resources

Deutsche Telekom

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. 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.

Cape Lambert Resources

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Deutsche Telekom and Cape Lambert

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

The idea behind Deutsche Telekom AG and Cape Lambert Resources 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.