Correlation Between British American and TELECOM ITALIA
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and TELECOM ITALIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and TELECOM ITALIA, you can compare the effects of market volatilities on British American 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 British American with a short position of TELECOM ITALIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and TELECOM ITALIA.
Diversification Opportunities for British American and TELECOM ITALIA
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between British and TELECOM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and TELECOM ITALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALIA and British American 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 British American Tobacco 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 British American i.e., British American and TELECOM ITALIA go up and down completely randomly.
Pair Corralation between British American and TELECOM ITALIA
Assuming the 90 days trading horizon British American is expected to generate 1.55 times less return on investment than TELECOM ITALIA. But when comparing it to its historical volatility, British American Tobacco is 2.37 times less risky than TELECOM ITALIA. It trades about 0.32 of its potential returns per unit of risk. TELECOM ITALIA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 24.00 in TELECOM ITALIA on November 7, 2024 and sell it today you would earn a total of 3.00 from holding TELECOM ITALIA or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. TELECOM ITALIA
Performance |
| Timeline |
| British American Tobacco |
| TELECOM ITALIA |
British American and TELECOM ITALIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and TELECOM ITALIA
The main advantage of trading using opposite British American and TELECOM ITALIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. MPH Health Care | British American vs. National Health Investors | British American vs. Siemens Healthineers AG | British American vs. PREMIER FOODS |
| TELECOM ITALIA vs. Sunny Optical Technology | TELECOM ITALIA vs. SOLSTAD OFFSHORE NK | TELECOM ITALIA vs. Ribbon Communications | TELECOM ITALIA vs. Verizon Communications |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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