Correlation Between Magyar Telekom and Koninklijke KPN

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

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

Diversification Opportunities for Magyar Telekom and Koninklijke KPN

0.51

Correlation Coefficient

Magyar Telekom  Koninklijke KPN

Very weak diversification

The 3 months correlation between Magyar and Koninklijke is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Magyar Telekom Plc and Koninklijke KPN NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke KPN NV and Magyar Telekom 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 Magyar Telekom Plc are associated (or correlated) with Koninklijke KPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke KPN NV has no effect on the direction of Magyar Telekom i.e., Magyar Telekom and Koninklijke KPN go up and down completely randomly.

Pair Corralation between Magyar Telekom and Koninklijke KPN

If you would invest  1,430  in Magyar Telekom Plc on September 13, 2024 and sell it today you would earn a total of  146.00  from holding Magyar Telekom Plc or generate 10.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Magyar Telekom Plc  vs.  Koninklijke KPN NV

Magyar Telekom Plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom Plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Magyar Telekom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Magyar Telekom and Koninklijke KPN

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

The idea behind Magyar Telekom Plc and Koninklijke KPN NV 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.