Correlation Between Deutsche Telekom and Orange SA

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

Diversification Opportunities for Deutsche Telekom and Orange SA

0.61

Correlation Coefficient

Deutsche Telekom  Orange SA

Poor diversification

The 3 months correlation between Deutsche and Orange is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA 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 Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Orange SA go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Orange SA

Assuming the 90 days horizon Deutsche Telekom is expected to generate 1.45 times less return on investment than Orange SA. But when comparing it to its historical volatility, Deutsche Telekom AG is 1.24 times less risky than Orange SA. It trades about 0.18 of its potential returns per unit of risk. Orange SA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  955.00  in Orange SA on December 21, 2024 and sell it today you would earn a total of  275.00  from holding Orange SA or generate 28.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Deutsche Telekom AG  vs.  Orange SA

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 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Deutsche Telekom reported solid returns over the last few months and may actually be approaching a breakup point.

Orange SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Orange SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deutsche Telekom and Orange SA

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

The idea behind Deutsche Telekom AG and Orange SA 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.