Correlation Between Deutsche Telekom and Telecom Italia

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

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

Diversification Opportunities for Deutsche Telekom and Telecom Italia

-0.38

Correlation Coefficient

Deutsche Telekom  Telecom Italia

Very good diversification

The 3 months correlation between Deutsche and Telecom is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Deutsche Telekom AG and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA and Deutsche 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 Deutsche Telekom AG are associated (or correlated) with Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of Deutsche Telekom i.e., Deutsche Telekom and Telecom Italia go up and down completely randomly.

Pair Corralation between Deutsche Telekom and Telecom Italia

If you would invest  2,045  in Deutsche Telekom AG on January 24, 2024 and sell it today you would earn a total of  262.00  from holding Deutsche Telekom AG or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.69%
Values	Daily Returns

Deutsche Telekom AG  vs.  Telecom Italia SpA

Deutsche Telekom

Risk-Adjusted Performance

0 of 100

Very Weak

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

Telecom Italia SpA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Deutsche Telekom and Telecom Italia

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

The idea behind Deutsche Telekom AG and Telecom Italia SpA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.