Correlation Between Deutsche Telekom and Citycon Oyj

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

Diversification Opportunities for Deutsche Telekom and Citycon Oyj

-0.57

Correlation Coefficient

Deutsche Telekom  Citycon Oyj

Excellent diversification

The 3 months correlation between Deutsche and Citycon is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Citycon Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citycon Oyj 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 Citycon Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citycon Oyj has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Citycon Oyj go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Citycon Oyj

Assuming the 90 days trading horizon Deutsche Telekom AG is expected to under-perform the Citycon Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Deutsche Telekom AG is 2.35 times less risky than Citycon Oyj. The stock trades about -0.16 of its potential returns per unit of risk. The Citycon Oyj is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  329.00  in Citycon Oyj on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Citycon Oyj or generate 0.3% 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.  Citycon Oyj

Deutsche Telekom

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Citycon Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citycon Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Deutsche Telekom and Citycon Oyj

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

The idea behind Deutsche Telekom AG and Citycon Oyj 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.