Correlation Between Deutsche Telekom and AeroVironment

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

Diversification Opportunities for Deutsche Telekom and AeroVironment

-0.43

Correlation Coefficient

Deutsche Telekom  AeroVironment

Very good diversification

The 3 months correlation between Deutsche and AeroVironment is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and AeroVironment go up and down completely randomly.

Pair Corralation between Deutsche Telekom and AeroVironment

Assuming the 90 days trading horizon Deutsche Telekom AG is expected to generate 0.51 times more return on investment than AeroVironment. However, Deutsche Telekom AG is 1.95 times less risky than AeroVironment. It trades about 0.16 of its potential returns per unit of risk. AeroVironment is currently generating about -0.12 per unit of risk. If you would invest  2,899  in Deutsche Telekom AG on December 27, 2024 and sell it today you would earn a total of  456.00  from holding Deutsche Telekom AG or generate 15.73% return on investment over 90 days.

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

Deutsche Telekom AG  vs.  AeroVironment

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

AeroVironment

Risk-Adjusted Performance

Very Weak

Over the last 90 days AeroVironment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Deutsche Telekom and AeroVironment

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

The idea behind Deutsche Telekom AG and AeroVironment 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.