Correlation Between Telecom Italia and Solstad Offshore
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Solstad Offshore 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 Telecom Italia and Solstad Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telecom Italia SpA and Solstad Offshore ASA, you can compare the effects of market volatilities on Telecom Italia and Solstad Offshore 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 Telecom Italia with a short position of Solstad Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Solstad Offshore.
Diversification Opportunities for Telecom Italia and Solstad Offshore
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Telecom and Solstad is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA and Telecom Italia 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 Telecom Italia SpA are associated (or correlated) with Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Telecom Italia i.e., Telecom Italia and Solstad Offshore go up and down completely randomly.
Pair Corralation between Telecom Italia and Solstad Offshore
Assuming the 90 days trading horizon Telecom Italia SpA is expected to generate 0.63 times more return on investment than Solstad Offshore. However, Telecom Italia SpA is 1.58 times less risky than Solstad Offshore. It trades about 0.14 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.06 per unit of risk. If you would invest 29.00 in Telecom Italia SpA on October 30, 2024 and sell it today you would earn a total of 1.00 from holding Telecom Italia SpA or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telecom Italia SpA vs. Solstad Offshore ASA
Performance |
| Timeline |
| Telecom Italia SpA |
| Solstad Offshore ASA |
Telecom Italia and Solstad Offshore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Italia and Solstad Offshore
The main advantage of trading using opposite Telecom Italia and Solstad Offshore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Solstad Offshore 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 Solstad Offshore will offset losses from the drop in Solstad Offshore's long position.| Telecom Italia vs. Sydbank | Telecom Italia vs. Baker Steel Resources | Telecom Italia vs. Cembra Money Bank | Telecom Italia vs. United States Steel |
| Solstad Offshore vs. Sabien Technology Group | Solstad Offshore vs. Auction Technology Group | Solstad Offshore vs. Micron Technology | Solstad Offshore vs. URU Metals |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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