Correlation Between Japan Asia and Deutsche Telekom

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

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

Diversification Opportunities for Japan Asia and Deutsche Telekom

0.16

Correlation Coefficient

Japan Asia  Deutsche Telekom

Average diversification

The 3 months correlation between Japan and Deutsche is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and Japan Asia 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 Japan Asia Investment 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 Japan Asia i.e., Japan Asia and Deutsche Telekom go up and down completely randomly.

Pair Corralation between Japan Asia and Deutsche Telekom

Assuming the 90 days horizon Japan Asia is expected to generate 19.38 times less return on investment than Deutsche Telekom. But when comparing it to its historical volatility, Japan Asia Investment is 1.45 times less risky than Deutsche Telekom. It trades about 0.01 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,660  in Deutsche Telekom AG on September 17, 2024 and sell it today you would earn a total of  280.00  from holding Deutsche Telekom AG or generate 10.53% return on investment over 90 days.

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

Japan Asia Investment  vs.  Deutsche Telekom AG

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Japan Asia and Deutsche Telekom

The main advantage of trading using opposite Japan Asia and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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 Japan Asia Investment 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.