Correlation Between Northern Data and TELECOM ITALIA
Can any of the company-specific risk be diversified away by investing in both Northern Data 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 Northern Data and TELECOM ITALIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Data AG and TELECOM ITALIA, you can compare the effects of market volatilities on Northern Data 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 Northern Data with a short position of TELECOM ITALIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Data and TELECOM ITALIA.
Diversification Opportunities for Northern Data and TELECOM ITALIA
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northern and TELECOM is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Northern Data AG and TELECOM ITALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALIA and Northern Data 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 Northern Data AG 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 Northern Data i.e., Northern Data and TELECOM ITALIA go up and down completely randomly.
Pair Corralation between Northern Data and TELECOM ITALIA
Assuming the 90 days trading horizon Northern Data AG is expected to generate 1.8 times more return on investment than TELECOM ITALIA. However, Northern Data is 1.8 times more volatile than TELECOM ITALIA. It trades about 0.08 of its potential returns per unit of risk. TELECOM ITALIA is currently generating about 0.0 per unit of risk. If you would invest 1,020 in Northern Data AG on November 4, 2024 and sell it today you would earn a total of 3,465 from holding Northern Data AG or generate 339.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Data AG vs. TELECOM ITALIA
Performance |
| Timeline |
| Northern Data AG |
| TELECOM ITALIA |
Northern Data and TELECOM ITALIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Data and TELECOM ITALIA
The main advantage of trading using opposite Northern Data and TELECOM ITALIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Data 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.| Northern Data vs. Major Drilling Group | Northern Data vs. PREMIER FOODS | Northern Data vs. AWILCO DRILLING PLC | Northern Data vs. COLUMBIA SPORTSWEAR |
| TELECOM ITALIA vs. Apple Inc | TELECOM ITALIA vs. Apple Inc | TELECOM ITALIA vs. Apple Inc | TELECOM ITALIA vs. Apple Inc |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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