Correlation Between Deutsche Telekom and BG Foods

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

Diversification Opportunities for Deutsche Telekom and BG Foods

-0.18
  Correlation Coefficient

Good diversification

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

Pair Corralation between Deutsche Telekom and BG Foods

Given the investment horizon of 90 days Deutsche Telekom AG is expected to under-perform the BG Foods. In addition to that, Deutsche Telekom is 1.92 times more volatile than BG Foods. It trades about -0.07 of its total potential returns per unit of risk. BG Foods is currently generating about -0.03 per unit of volatility. If you would invest  2,362  in BG Foods on December 30, 2023 and sell it today you would lose (1,218) from holding BG Foods or give up 51.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy61.34%
ValuesDaily Returns

Deutsche Telekom AG  vs.  BG Foods

 Performance 
       Timeline  
Deutsche Telekom 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 somewhat strong technical and fundamental indicators, Deutsche Telekom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
BG Foods 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal technical and fundamental indicators, BG Foods may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Deutsche Telekom and BG Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Deutsche Telekom and BG Foods

The main advantage of trading using opposite Deutsche Telekom and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Deutsche Telekom position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.
The idea behind Deutsche Telekom AG and BG Foods 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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