Correlation Between Koninklijke KPN and Telefonica

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

Diversification Opportunities for Koninklijke KPN and Telefonica

-0.08

Correlation Coefficient

Koninklijke KPN  Telefonica

Good diversification

The 3 months correlation between Koninklijke and Telefonica is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and Telefonica SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonica SA ADR 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 Telefonica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonica SA ADR has no effect on the direction of Koninklijke KPN i.e., Koninklijke KPN and Telefonica go up and down completely randomly.

Pair Corralation between Koninklijke KPN and Telefonica

If you would invest  334.00  in Koninklijke KPN NV on October 15, 2024 and sell it today you would earn a total of  0.00  from holding Koninklijke KPN NV or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Koninklijke KPN NV  vs.  Telefonica SA ADR

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.

Telefonica SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telefonica SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Koninklijke KPN and Telefonica

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

The idea behind Koninklijke KPN NV and Telefonica SA ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.