Correlation Between Kraft Heinz and Deutsche Telekom

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Can any of the company-specific risk be diversified away by investing in both Kraft Heinz and Deutsche Telekom 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 Kraft Heinz and Deutsche Telekom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kraft Heinz Co and Deutsche Telekom AG, you can compare the effects of market volatilities on Kraft Heinz and Deutsche Telekom 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 Kraft Heinz with a short position of Deutsche Telekom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kraft Heinz and Deutsche Telekom.

Diversification Opportunities for Kraft Heinz and Deutsche Telekom

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Kraft and Deutsche is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kraft Heinz Co and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom and Kraft Heinz 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 Kraft Heinz Co are associated (or correlated) with Deutsche Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Telekom has no effect on the direction of Kraft Heinz i.e., Kraft Heinz and Deutsche Telekom go up and down completely randomly.

Pair Corralation between Kraft Heinz and Deutsche Telekom

Considering the 90-day investment horizon Kraft Heinz Co is expected to generate 0.22 times more return on investment than Deutsche Telekom. However, Kraft Heinz Co is 4.57 times less risky than Deutsche Telekom. It trades about 0.0 of its potential returns per unit of risk. Deutsche Telekom AG is currently generating about -0.07 per unit of risk. If you would invest  3,783  in Kraft Heinz Co on December 30, 2023 and sell it today you would lose (93.00) from holding Kraft Heinz Co or give up 2.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy61.34%
ValuesDaily Returns

Kraft Heinz Co  vs.  Deutsche Telekom AG

 Performance 
       Timeline  
Kraft Heinz 

Risk-Adjusted Performance

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High
Weak
Over the last 90 days Kraft Heinz Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Kraft Heinz is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Deutsche Telekom 

Risk-Adjusted Performance

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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.

Kraft Heinz and Deutsche Telekom Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kraft Heinz and Deutsche Telekom

The main advantage of trading using opposite Kraft Heinz and Deutsche Telekom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kraft Heinz position performs unexpectedly, Deutsche Telekom 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 Deutsche Telekom will offset losses from the drop in Deutsche Telekom's long position.
The idea behind Kraft Heinz Co and Deutsche Telekom 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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