Correlation Between Telecom Italia and BCE
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and BCE 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 BCE 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 BCE Inc, you can compare the effects of market volatilities on Telecom Italia and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and BCE.
Diversification Opportunities for Telecom Italia and BCE
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Telecom and BCE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE Inc 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Telecom Italia i.e., Telecom Italia and BCE go up and down completely randomly.
Pair Corralation between Telecom Italia and BCE
Assuming the 90 days horizon Telecom Italia SpA is expected to generate 2.19 times more return on investment than BCE. However, Telecom Italia is 2.19 times more volatile than BCE Inc. It trades about 0.44 of its potential returns per unit of risk. BCE Inc is currently generating about -0.07 per unit of risk. If you would invest 208.00 in Telecom Italia SpA on August 28, 2024 and sell it today you would earn a total of 119.00 from holding Telecom Italia SpA or generate 57.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 8.89% |
| Values | Daily Returns |
Telecom Italia SpA vs. BCE Inc
Performance |
| Timeline |
| Telecom Italia SpA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| BCE Inc |
Telecom Italia and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telecom Italia and BCE
The main advantage of trading using opposite Telecom Italia and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Telecom Italia vs. Telefonica Brasil SA | Telecom Italia vs. Orange SA ADR | Telecom Italia vs. Vodafone Group PLC | Telecom Italia vs. Grupo Televisa SAB |
| BCE vs. Liberty Broadband Srs | BCE vs. Ribbon Communications | BCE vs. Liberty Broadband Srs | BCE vs. Shenandoah Telecommunications Co |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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