Correlation Between Telefonica and Koninklijke KPN

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

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

Diversification Opportunities for Telefonica and Koninklijke KPN

-0.08

Correlation Coefficient

Telefonica  Koninklijke KPN

Good diversification

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

Pair Corralation between Telefonica and Koninklijke KPN

If you would invest  334.00  in Koninklijke KPN NV on September 28, 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	5.0%
Values	Daily Returns

Telefonica SA ADR  vs.  Koninklijke KPN NV

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with Telefonica and Koninklijke KPN

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

The idea behind Telefonica SA ADR and Koninklijke KPN NV 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.