Correlation Between VERBUND AG and Telekom Austria

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

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

Diversification Opportunities for VERBUND AG and Telekom Austria

-0.07

Correlation Coefficient

VERBUND AG  Telekom Austria

Good diversification

The 3 months correlation between VERBUND and Telekom is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding VERBUND AG and Telekom Austria AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telekom Austria AG and VERBUND AG 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 VERBUND AG are associated (or correlated) with Telekom Austria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telekom Austria AG has no effect on the direction of VERBUND AG i.e., VERBUND AG and Telekom Austria go up and down completely randomly.

Pair Corralation between VERBUND AG and Telekom Austria

Assuming the 90 days trading horizon VERBUND AG is expected to generate 1.2 times more return on investment than Telekom Austria. However, VERBUND AG is 1.2 times more volatile than Telekom Austria AG. It trades about 0.0 of its potential returns per unit of risk. Telekom Austria AG is currently generating about -0.16 per unit of risk. If you would invest  7,580  in VERBUND AG on September 5, 2024 and sell it today you would lose (60.00) from holding VERBUND AG or give up 0.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

VERBUND AG  vs.  Telekom Austria AG

VERBUND AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VERBUND AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, VERBUND AG is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Telekom Austria AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telekom Austria AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with VERBUND AG and Telekom Austria

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

The idea behind VERBUND AG and Telekom Austria 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.