Correlation Between TELECOM ITALIA and Cogent Communications
Can any of the company-specific risk be diversified away by investing in both TELECOM ITALIA and Cogent Communications 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 Cogent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TELECOM ITALIA and Cogent Communications Holdings, you can compare the effects of market volatilities on TELECOM ITALIA and Cogent Communications 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 Cogent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELECOM ITALIA and Cogent Communications.
Diversification Opportunities for TELECOM ITALIA and Cogent Communications
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TELECOM and Cogent is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM ITALIA and Cogent Communications Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent 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 Cogent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Communications has no effect on the direction of TELECOM ITALIA i.e., TELECOM ITALIA and Cogent Communications go up and down completely randomly.
Pair Corralation between TELECOM ITALIA and Cogent Communications
Assuming the 90 days trading horizon TELECOM ITALIA is expected to generate 1.71 times more return on investment than Cogent Communications. However, TELECOM ITALIA is 1.71 times more volatile than Cogent Communications Holdings. It trades about 0.01 of its potential returns per unit of risk. Cogent Communications Holdings is currently generating about -0.11 per unit of risk. If you would invest 25.00 in TELECOM ITALIA on October 12, 2024 and sell it today you would earn a total of 0.00 from holding TELECOM ITALIA or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TELECOM ITALIA vs. Cogent Communications Holdings
Performance |
| Timeline |
| TELECOM ITALIA |
| Cogent Communications |
TELECOM ITALIA and Cogent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TELECOM ITALIA and Cogent Communications
The main advantage of trading using opposite TELECOM ITALIA and Cogent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TELECOM ITALIA position performs unexpectedly, Cogent Communications 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 Cogent Communications will offset losses from the drop in Cogent Communications' long position.| TELECOM ITALIA vs. Performance Food Group | TELECOM ITALIA vs. The Japan Steel | TELECOM ITALIA vs. MTY Food Group | TELECOM ITALIA vs. National Beverage Corp |
| Cogent Communications vs. NTT DATA | Cogent Communications vs. TERADATA | Cogent Communications vs. Alliance Data Systems | Cogent Communications vs. MICRONIC MYDATA |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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