Correlation Between Telecom Italia and Auto Trader
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Auto Trader 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 Auto Trader 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 Auto Trader Group, you can compare the effects of market volatilities on Telecom Italia and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Auto Trader.
Diversification Opportunities for Telecom Italia and Auto Trader
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Telecom and Auto is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader Group 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of Telecom Italia i.e., Telecom Italia and Auto Trader go up and down completely randomly.
Pair Corralation between Telecom Italia and Auto Trader
Assuming the 90 days trading horizon Telecom Italia SpA is expected to generate 2.05 times more return on investment than Auto Trader. However, Telecom Italia is 2.05 times more volatile than Auto Trader Group. It trades about 0.03 of its potential returns per unit of risk. Auto Trader Group is currently generating about 0.07 per unit of risk. If you would invest 20.00 in Telecom Italia SpA on September 4, 2024 and sell it today you would earn a total of 6.00 from holding Telecom Italia SpA or generate 30.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telecom Italia SpA vs. Auto Trader Group
Performance |
| Timeline |
| Telecom Italia SpA |
| Auto Trader Group |
Telecom Italia and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Italia and Auto Trader
The main advantage of trading using opposite Telecom Italia and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| Telecom Italia vs. Spirent Communications plc | Telecom Italia vs. Cairo Communication SpA | Telecom Italia vs. Zegona Communications Plc | Telecom Italia vs. Verizon Communications |
| Auto Trader vs. Rightmove PLC | Auto Trader vs. Bioventix | Auto Trader vs. VeriSign | Auto Trader vs. Games Workshop Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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