Correlation Between T Mobile and Deutsche Telekom

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

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

Diversification Opportunities for T Mobile and Deutsche Telekom

0.87

Correlation Coefficient

T Mobile  Deutsche Telekom

Very poor diversification

The 3 months correlation between TM5 and Deutsche is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding T Mobile and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and T Mobile 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 T Mobile 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 T Mobile i.e., T Mobile and Deutsche Telekom go up and down completely randomly.

Pair Corralation between T Mobile and Deutsche Telekom

Assuming the 90 days horizon T Mobile is expected to generate 1.04 times less return on investment than Deutsche Telekom. But when comparing it to its historical volatility, T Mobile is 1.15 times less risky than Deutsche Telekom. It trades about 0.07 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,775  in Deutsche Telekom AG on September 26, 2024 and sell it today you would earn a total of  1,085  from holding Deutsche Telekom AG or generate 61.13% return on investment over 90 days.

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

T Mobile  vs.  Deutsche Telekom AG

T Mobile

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Mobile are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, T Mobile reported solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Telekom

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Deutsche Telekom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with T Mobile and Deutsche Telekom

The main advantage of trading using opposite T Mobile and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Mobile 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 T Mobile 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.