Correlation Between AIR PRODCHEMICALS and Deutsche Telekom

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

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

Diversification Opportunities for AIR PRODCHEMICALS and Deutsche Telekom

0.86

Correlation Coefficient

AIR PRODCHEMICALS  Deutsche Telekom

Very poor diversification

The 3 months correlation between AIR and Deutsche is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Deutsche Telekom go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and Deutsche Telekom

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.77 times more return on investment than Deutsche Telekom. However, AIR PRODCHEMICALS is 1.3 times less risky than Deutsche Telekom. It trades about 0.16 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.09 per unit of risk. If you would invest  25,501  in AIR PRODCHEMICALS on September 16, 2024 and sell it today you would earn a total of  4,249  from holding AIR PRODCHEMICALS or generate 16.66% return on investment over 90 days.

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

AIR PRODCHEMICALS  vs.  Deutsche Telekom AG

AIR PRODCHEMICALS

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, AIR PRODCHEMICALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Telekom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain 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 AIR PRODCHEMICALS and Deutsche Telekom

The main advantage of trading using opposite AIR PRODCHEMICALS and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.