Correlation Between Koninklijke KPN and Lumen Technologies

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

By analyzing existing cross correlation between Koninklijke KPN NV and Lumen Technologies, you can compare the effects of market volatilities on Koninklijke KPN and Lumen Technologies 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 Koninklijke KPN with a short position of Lumen Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke KPN and Lumen Technologies.

Diversification Opportunities for Koninklijke KPN and Lumen Technologies

0.18

Correlation Coefficient

Koninklijke KPN  Lumen Technologies

Average diversification

The 3 months correlation between Koninklijke and Lumen is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies and Koninklijke KPN 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 Koninklijke KPN NV are associated (or correlated) with Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Koninklijke KPN i.e., Koninklijke KPN and Lumen Technologies go up and down completely randomly.

Pair Corralation between Koninklijke KPN and Lumen Technologies

If you would invest  599.00  in Lumen Technologies on September 12, 2024 and sell it today you would earn a total of  24.00  from holding Lumen Technologies or generate 4.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Koninklijke KPN NV  vs.  Lumen Technologies

Koninklijke KPN NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Koninklijke KPN NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Koninklijke KPN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lumen Technologies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lumen Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Lumen Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Koninklijke KPN and Lumen Technologies

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

The idea behind Koninklijke KPN NV and Lumen Technologies 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.