Correlation Between Deutsche Telekom and Zhaojin Mining

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

Diversification Opportunities for Deutsche Telekom and Zhaojin Mining

-0.55

Correlation Coefficient

Deutsche Telekom  Zhaojin Mining

Excellent diversification

The 3 months correlation between Deutsche and Zhaojin is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Zhaojin Mining Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhaojin Mining Industry 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 Zhaojin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhaojin Mining Industry has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Zhaojin Mining go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Zhaojin Mining

Assuming the 90 days trading horizon Deutsche Telekom is expected to generate 2.94 times less return on investment than Zhaojin Mining. But when comparing it to its historical volatility, Deutsche Telekom AG is 4.12 times less risky than Zhaojin Mining. It trades about 0.42 of its potential returns per unit of risk. Zhaojin Mining Industry is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  132.00  in Zhaojin Mining Industry on October 22, 2024 and sell it today you would earn a total of  20.00  from holding Zhaojin Mining Industry or generate 15.15% 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.  Zhaojin Mining Industry

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 unsteady technical and fundamental indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Zhaojin Mining Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhaojin Mining Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Zhaojin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Deutsche Telekom and Zhaojin Mining

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

The idea behind Deutsche Telekom AG and Zhaojin Mining Industry 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.