Correlation Between Infineon Technologies and Magyar Telekom

Can any of the company-specific risk be diversified away by investing in both Infineon Technologies and Magyar Telekom 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 Infineon Technologies and Magyar Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Infineon Technologies AG and Magyar Telekom PLC, you can compare the effects of market volatilities on Infineon Technologies and Magyar Telekom 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 Infineon Technologies with a short position of Magyar Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Infineon Technologies and Magyar Telekom.

Diversification Opportunities for Infineon Technologies and Magyar Telekom

0.42

Correlation Coefficient

Infineon Technologies  Magyar Telekom

Very weak diversification

The 3 months correlation between Infineon and Magyar is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Infineon Technologies AG and Magyar Telekom PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Telekom PLC and Infineon Technologies 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 Infineon Technologies AG are associated (or correlated) with Magyar Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Telekom PLC has no effect on the direction of Infineon Technologies i.e., Infineon Technologies and Magyar Telekom go up and down completely randomly.

Pair Corralation between Infineon Technologies and Magyar Telekom

Assuming the 90 days trading horizon Infineon Technologies is expected to generate 52.24 times less return on investment than Magyar Telekom. In addition to that, Infineon Technologies is 1.56 times more volatile than Magyar Telekom PLC. It trades about 0.0 of its total potential returns per unit of risk. Magyar Telekom PLC is currently generating about 0.26 per unit of volatility. If you would invest  127,400  in Magyar Telekom PLC on December 30, 2024 and sell it today you would earn a total of  48,200  from holding Magyar Telekom PLC or generate 37.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.56%
Values	Daily Returns

Infineon Technologies AG  vs.  Magyar Telekom PLC

Infineon Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Infineon Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Infineon Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Magyar Telekom PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom PLC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Magyar Telekom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Infineon Technologies and Magyar Telekom

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

The idea behind Infineon Technologies AG and Magyar Telekom PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.