Correlation Between TELECOM ITALIA and Bank of America
Can any of the company-specific risk be diversified away by investing in both TELECOM ITALIA and Bank of America 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 Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TELECOM ITALIA and Verizon Communications, you can compare the effects of market volatilities on TELECOM ITALIA and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELECOM ITALIA and Bank of America.
Diversification Opportunities for TELECOM ITALIA and Bank of America
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TELECOM and Bank is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM ITALIA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications 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 are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of TELECOM ITALIA i.e., TELECOM ITALIA and Bank of America go up and down completely randomly.
Pair Corralation between TELECOM ITALIA and Bank of America
Assuming the 90 days trading horizon TELECOM ITALIA is expected to generate 2.88 times more return on investment than Bank of America. However, TELECOM ITALIA is 2.88 times more volatile than Verizon Communications. It trades about 0.1 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.03 per unit of risk. If you would invest 22.00 in TELECOM ITALIA on November 6, 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TELECOM ITALIA vs. Verizon Communications
Performance |
| Timeline |
| TELECOM ITALIA |
| Verizon Communications |
TELECOM ITALIA and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TELECOM ITALIA and Bank of America
The main advantage of trading using opposite TELECOM ITALIA and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TELECOM ITALIA position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| TELECOM ITALIA vs. Sunny Optical Technology | TELECOM ITALIA vs. SOLSTAD OFFSHORE NK | TELECOM ITALIA vs. Ribbon Communications | TELECOM ITALIA vs. Verizon Communications |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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