Correlation Between Telecom Italia and Telephone

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Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Telephone 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 Telephone 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 Telephone and Data, you can compare the effects of market volatilities on Telecom Italia and Telephone 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 Telephone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Telephone.

Diversification Opportunities for Telecom Italia and Telephone

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Telecom and Telephone is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Telephone and Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telephone and Data 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 Telephone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telephone and Data has no effect on the direction of Telecom Italia i.e., Telecom Italia and Telephone go up and down completely randomly.

Pair Corralation between Telecom Italia and Telephone

If you would invest  1,786  in Telephone and Data on August 28, 2024 and sell it today you would earn a total of  152.00  from holding Telephone and Data or generate 8.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy1.59%
ValuesDaily Returns

Telecom Italia SpA  vs.  Telephone and Data

 Performance 
       Timeline  
Telecom Italia SpA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Telecom Italia SpA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Telecom Italia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.
Telephone and Data 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Telephone and Data are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Telephone may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Telecom Italia and Telephone Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telecom Italia and Telephone

The main advantage of trading using opposite Telecom Italia and Telephone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Telephone 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 Telephone will offset losses from the drop in Telephone's long position.
The idea behind Telecom Italia SpA and Telephone and Data pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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