Correlation Between T-MOBILE and Koninklijke Ahold

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

By analyzing existing cross correlation between T MOBILE US and Koninklijke Ahold Delhaize, you can compare the effects of market volatilities on T-MOBILE and Koninklijke Ahold 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 Koninklijke Ahold. Check out your portfolio center. Please also check ongoing floating volatility patterns of T-MOBILE and Koninklijke Ahold.

Diversification Opportunities for T-MOBILE and Koninklijke Ahold

0.82

Correlation Coefficient

T-MOBILE  Koninklijke Ahold

Very poor diversification

The 3 months correlation between T-MOBILE and Koninklijke is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding T MOBILE US and Koninklijke Ahold Delhaize in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Ahold 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 US are associated (or correlated) with Koninklijke Ahold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Ahold has no effect on the direction of T-MOBILE i.e., T-MOBILE and Koninklijke Ahold go up and down completely randomly.

Pair Corralation between T-MOBILE and Koninklijke Ahold

Assuming the 90 days trading horizon T MOBILE US is expected to generate 1.12 times more return on investment than Koninklijke Ahold. However, T-MOBILE is 1.12 times more volatile than Koninklijke Ahold Delhaize. It trades about 0.11 of its potential returns per unit of risk. Koninklijke Ahold Delhaize is currently generating about 0.08 per unit of risk. If you would invest  14,648  in T MOBILE US on October 9, 2024 and sell it today you would earn a total of  5,962  from holding T MOBILE US or generate 40.7% return on investment over 90 days.

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

T MOBILE US  vs.  Koninklijke Ahold Delhaize

T MOBILE US

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T MOBILE US are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, T-MOBILE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Koninklijke Ahold

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Ahold Delhaize are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Koninklijke Ahold is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with T-MOBILE and Koninklijke Ahold

The main advantage of trading using opposite T-MOBILE and Koninklijke Ahold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T-MOBILE position performs unexpectedly, Koninklijke Ahold 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 Ahold will offset losses from the drop in Koninklijke Ahold's long position.

The idea behind T MOBILE US and Koninklijke Ahold Delhaize 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.