Correlation Between Koninklijke KPN and PCCW

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

By analyzing existing cross correlation between Koninklijke KPN NV and PCCW Limited, you can compare the effects of market volatilities on Koninklijke KPN and PCCW 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 Koninklijke KPN with a short position of PCCW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke KPN and PCCW.

Diversification Opportunities for Koninklijke KPN and PCCW

0.26

Correlation Coefficient

Koninklijke KPN  PCCW

Modest diversification

The 3 months correlation between Koninklijke and PCCW is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and PCCW Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCCW Limited and Koninklijke KPN 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 Koninklijke KPN NV are associated (or correlated) with PCCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCCW Limited has no effect on the direction of Koninklijke KPN i.e., Koninklijke KPN and PCCW go up and down completely randomly.

Pair Corralation between Koninklijke KPN and PCCW

If you would invest  50.00  in PCCW Limited on September 28, 2024 and sell it today you would earn a total of  9.00  from holding PCCW Limited or generate 18.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.95%
Values	Daily Returns

Koninklijke KPN NV  vs.  PCCW Limited

Koninklijke KPN NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke KPN NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Koninklijke KPN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PCCW Limited

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PCCW Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, PCCW reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke KPN and PCCW

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

The idea behind Koninklijke KPN NV and PCCW Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.