Correlation Between Koninklijke KPN and VEON

Can any of the company-specific risk be diversified away by investing in both Koninklijke KPN and VEON 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 VEON 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 VEON, you can compare the effects of market volatilities on Koninklijke KPN and VEON 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 VEON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Koninklijke KPN and VEON.

Diversification Opportunities for Koninklijke KPN and VEON

-0.33

Correlation Coefficient

Koninklijke KPN  VEON

Very good diversification

The 3 months correlation between Koninklijke and VEON is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke KPN NV and VEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VEON 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 VEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VEON has no effect on the direction of Koninklijke KPN i.e., Koninklijke KPN and VEON go up and down completely randomly.

Pair Corralation between Koninklijke KPN and VEON

Assuming the 90 days trading horizon Koninklijke KPN NV is expected to under-perform the VEON. But the stock apears to be less risky and, when comparing its historical volatility, Koninklijke KPN NV is 3.68 times less risky than VEON. The stock trades about -0.03 of its potential returns per unit of risk. The VEON is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  100.00  in VEON on September 20, 2024 and sell it today you would earn a total of  19.00  from holding VEON or generate 19.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

Koninklijke KPN NV  vs.  VEON

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 comparatively stable basic indicators, Koninklijke KPN is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

VEON

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days VEON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, VEON unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke KPN and VEON

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

The idea behind Koninklijke KPN NV and VEON 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.