Correlation Between Kaiser Aluminum and Deutsche Telekom

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

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

Diversification Opportunities for Kaiser Aluminum and Deutsche Telekom

-0.25

Correlation Coefficient

Kaiser Aluminum  Deutsche Telekom

Very good diversification

The 3 months correlation between Kaiser and Deutsche is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kaiser Aluminum and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and Kaiser Aluminum 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 Kaiser Aluminum are associated (or correlated) with Deutsche Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Telekom has no effect on the direction of Kaiser Aluminum i.e., Kaiser Aluminum and Deutsche Telekom go up and down completely randomly.

Pair Corralation between Kaiser Aluminum and Deutsche Telekom

Assuming the 90 days trading horizon Kaiser Aluminum is expected to under-perform the Deutsche Telekom. But the stock apears to be less risky and, when comparing its historical volatility, Kaiser Aluminum is 1.09 times less risky than Deutsche Telekom. The stock trades about -0.06 of its potential returns per unit of risk. The Deutsche Telekom AG is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,880  in Deutsche Telekom AG on December 30, 2024 and sell it today you would earn a total of  460.00  from holding Deutsche Telekom AG or generate 15.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kaiser Aluminum  vs.  Deutsche Telekom AG

Kaiser Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kaiser Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Deutsche Telekom

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 9 (%) 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.

Pair Trading with Kaiser Aluminum and Deutsche Telekom

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

The idea behind Kaiser Aluminum and Deutsche Telekom AG 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 Transaction History module to view history of all your transactions and understand their impact on performance.