Correlation Between Deutsche Telekom and American Shipping

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

Diversification Opportunities for Deutsche Telekom and American Shipping

0.67

Correlation Coefficient

Deutsche Telekom  American Shipping

Poor diversification

The 3 months correlation between Deutsche and American is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and American Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Shipping 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 American Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Shipping has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and American Shipping go up and down completely randomly.

Pair Corralation between Deutsche Telekom and American Shipping

Assuming the 90 days trading horizon Deutsche Telekom is expected to generate 2.0 times less return on investment than American Shipping. But when comparing it to its historical volatility, Deutsche Telekom AG is 1.65 times less risky than American Shipping. It trades about 0.16 of its potential returns per unit of risk. American Shipping is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  191.00  in American Shipping on December 25, 2024 and sell it today you would earn a total of  60.00  from holding American Shipping or generate 31.41% 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.  American Shipping

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.

American Shipping

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Shipping are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Shipping reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Telekom and American Shipping

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

The idea behind Deutsche Telekom AG and American Shipping 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.