Correlation Between Telekom Austria and Palfinger

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

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

Diversification Opportunities for Telekom Austria and Palfinger

0.9

Correlation Coefficient

Telekom Austria  Palfinger

Almost no diversification

The 3 months correlation between Telekom and Palfinger is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Telekom Austria AG and Palfinger AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palfinger AG and Telekom Austria 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 Telekom Austria AG are associated (or correlated) with Palfinger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palfinger AG has no effect on the direction of Telekom Austria i.e., Telekom Austria and Palfinger go up and down completely randomly.

Pair Corralation between Telekom Austria and Palfinger

Assuming the 90 days trading horizon Telekom Austria AG is expected to under-perform the Palfinger. But the stock apears to be less risky and, when comparing its historical volatility, Telekom Austria AG is 1.01 times less risky than Palfinger. The stock trades about -0.13 of its potential returns per unit of risk. The Palfinger AG is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,195  in Palfinger AG on September 14, 2024 and sell it today you would lose (195.00) from holding Palfinger AG or give up 8.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Telekom Austria AG  vs.  Palfinger AG

Telekom Austria AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telekom Austria AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Palfinger AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palfinger AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's essential indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Telekom Austria and Palfinger

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

The idea behind Telekom Austria AG and Palfinger 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.