Correlation Between Deutsche Telekom and Nippon Telegraph

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

Diversification Opportunities for Deutsche Telekom and Nippon Telegraph

-0.37

Correlation Coefficient

Deutsche Telekom  Nippon Telegraph

Very good diversification

The 3 months correlation between Deutsche and Nippon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Nippon Telegraph Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph Tel 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 Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph Tel has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Nippon Telegraph go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Nippon Telegraph

Assuming the 90 days horizon Deutsche Telekom AG is expected to generate 0.63 times more return on investment than Nippon Telegraph. However, Deutsche Telekom AG is 1.58 times less risky than Nippon Telegraph. It trades about 0.04 of its potential returns per unit of risk. Nippon Telegraph Telephone is currently generating about 0.01 per unit of risk. If you would invest  2,152  in Deutsche Telekom AG on October 5, 2024 and sell it today you would earn a total of  774.00  from holding Deutsche Telekom AG or generate 35.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Deutsche Telekom AG  vs.  Nippon Telegraph Telephone

Deutsche Telekom

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Deutsche Telekom is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Nippon Telegraph Tel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Telegraph Telephone are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nippon Telegraph 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 Nippon Telegraph

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

The idea behind Deutsche Telekom AG and Nippon Telegraph Telephone 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.