Correlation Between Telecom Italia and American Homes
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and American Homes 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 American Homes 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 American Homes 4, you can compare the effects of market volatilities on Telecom Italia and American Homes 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 American Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and American Homes.
Diversification Opportunities for Telecom Italia and American Homes
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Telecom and American is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and American Homes 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Homes 4 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 American Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Homes 4 has no effect on the direction of Telecom Italia i.e., Telecom Italia and American Homes go up and down completely randomly.
Pair Corralation between Telecom Italia and American Homes
Assuming the 90 days trading horizon Telecom Italia SpA is expected to under-perform the American Homes. In addition to that, Telecom Italia is 2.42 times more volatile than American Homes 4. It trades about -0.06 of its total potential returns per unit of risk. American Homes 4 is currently generating about 0.32 per unit of volatility. If you would invest 3,520 in American Homes 4 on September 5, 2024 and sell it today you would earn a total of 248.00 from holding American Homes 4 or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Telecom Italia SpA vs. American Homes 4
Performance |
| Timeline |
| Telecom Italia SpA |
| American Homes 4 |
Telecom Italia and American Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Italia and American Homes
The main advantage of trading using opposite Telecom Italia and American Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, American Homes 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 American Homes will offset losses from the drop in American Homes' long position.| Telecom Italia vs. Samsung Electronics Co | Telecom Italia vs. Samsung Electronics Co | Telecom Italia vs. Hyundai Motor | Telecom Italia vs. Toyota Motor Corp |
| American Homes vs. Axway Software SA | American Homes vs. Public Storage | American Homes vs. Telecom Italia SpA | American Homes vs. Orient Telecoms |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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