Correlation Between Telecom Italia and Nasdaq
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Nasdaq 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 Nasdaq 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 Nasdaq Inc, you can compare the effects of market volatilities on Telecom Italia and Nasdaq 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 Nasdaq. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Nasdaq.
Diversification Opportunities for Telecom Italia and Nasdaq
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Telecom and Nasdaq is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Nasdaq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq Inc 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 Nasdaq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq Inc has no effect on the direction of Telecom Italia i.e., Telecom Italia and Nasdaq go up and down completely randomly.
Pair Corralation between Telecom Italia and Nasdaq
Assuming the 90 days trading horizon Telecom Italia is expected to generate 3.25 times less return on investment than Nasdaq. But when comparing it to its historical volatility, Telecom Italia SpA is 3.35 times less risky than Nasdaq. It trades about 0.04 of its potential returns per unit of risk. Nasdaq Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,949 in Nasdaq Inc on September 14, 2024 and sell it today you would earn a total of 2,174 from holding Nasdaq Inc or generate 36.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.99% |
| Values | Daily Returns |
Telecom Italia SpA vs. Nasdaq Inc
Performance |
| Timeline |
| Telecom Italia SpA |
| Nasdaq Inc |
Telecom Italia and Nasdaq Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Italia and Nasdaq
The main advantage of trading using opposite Telecom Italia and Nasdaq positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Nasdaq 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 Nasdaq will offset losses from the drop in Nasdaq's long position.| Telecom Italia vs. Wheaton Precious Metals | Telecom Italia vs. Amedeo Air Four | Telecom Italia vs. Darden Restaurants | Telecom Italia vs. Porvair plc |
| Nasdaq vs. Charter Communications Cl | Nasdaq vs. Telecom Italia SpA | Nasdaq vs. Zegona Communications Plc | Nasdaq vs. National Beverage Corp |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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