Correlation Between Axfood AB and Telecom Italia
Can any of the company-specific risk be diversified away by investing in both Axfood AB and Telecom Italia 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 Axfood AB and Telecom Italia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axfood AB and Telecom Italia, you can compare the effects of market volatilities on Axfood AB and Telecom Italia 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 Axfood AB with a short position of Telecom Italia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Telecom Italia.
Diversification Opportunities for Axfood AB and Telecom Italia
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Axfood and Telecom is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Telecom Italia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia and Axfood AB 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 Axfood AB are associated (or correlated) with Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia has no effect on the direction of Axfood AB i.e., Axfood AB and Telecom Italia go up and down completely randomly.
Pair Corralation between Axfood AB and Telecom Italia
Assuming the 90 days trading horizon Axfood AB is expected to under-perform the Telecom Italia. But the stock apears to be less risky and, when comparing its historical volatility, Axfood AB is 3.05 times less risky than Telecom Italia. The stock trades about -0.01 of its potential returns per unit of risk. The Telecom Italia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 22.00 in Telecom Italia on September 14, 2024 and sell it today you would earn a total of 4.00 from holding Telecom Italia or generate 18.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axfood AB vs. Telecom Italia
Performance |
| Timeline |
| Axfood AB |
| Telecom Italia |
Axfood AB and Telecom Italia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axfood AB and Telecom Italia
The main advantage of trading using opposite Axfood AB and Telecom Italia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axfood AB position performs unexpectedly, Telecom Italia 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 Telecom Italia will offset losses from the drop in Telecom Italia's long position.| Axfood AB vs. UNIQA Insurance Group | Axfood AB vs. Southern Copper Corp | Axfood AB vs. European Metals Holdings | Axfood AB vs. Sabre Insurance Group |
| Telecom Italia vs. Taylor Maritime Investments | Telecom Italia vs. Axfood AB | Telecom Italia vs. Federal Realty Investment | Telecom Italia vs. Schroders Investment Trusts |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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