Correlation Between Telecom Italia and Pentair PLC
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Pentair PLC 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 Pentair PLC 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 Pentair PLC, you can compare the effects of market volatilities on Telecom Italia and Pentair PLC 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 Pentair PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Pentair PLC.
Diversification Opportunities for Telecom Italia and Pentair PLC
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Telecom and Pentair is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Telecom Italia i.e., Telecom Italia and Pentair PLC go up and down completely randomly.
Pair Corralation between Telecom Italia and Pentair PLC
Assuming the 90 days trading horizon Telecom Italia SpA is expected to generate 1.64 times more return on investment than Pentair PLC. However, Telecom Italia is 1.64 times more volatile than Pentair PLC. It trades about -0.07 of its potential returns per unit of risk. Pentair PLC is currently generating about -0.41 per unit of risk. If you would invest 31.00 in Telecom Italia SpA on October 16, 2024 and sell it today you would lose (1.00) from holding Telecom Italia SpA or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Telecom Italia SpA vs. Pentair PLC
Performance |
| Timeline |
| Telecom Italia SpA |
| Pentair PLC |
Telecom Italia and Pentair PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Italia and Pentair PLC
The main advantage of trading using opposite Telecom Italia and Pentair PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Pentair PLC 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 Pentair PLC will offset losses from the drop in Pentair PLC's long position.| Telecom Italia vs. Alien Metals | Telecom Italia vs. URU Metals | Telecom Italia vs. International Consolidated Airlines | Telecom Italia vs. European Metals Holdings |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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