Correlation Between TELECOM ITALIA and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both TELECOM ITALIA and STMicroelectronics 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 STMicroelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TELECOM ITALIA and STMicroelectronics NV, you can compare the effects of market volatilities on TELECOM ITALIA and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELECOM ITALIA and STMicroelectronics.
Diversification Opportunities for TELECOM ITALIA and STMicroelectronics
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TELECOM and STMicroelectronics is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM ITALIA and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of TELECOM ITALIA i.e., TELECOM ITALIA and STMicroelectronics go up and down completely randomly.
Pair Corralation between TELECOM ITALIA and STMicroelectronics
Assuming the 90 days trading horizon TELECOM ITALIA is expected to under-perform the STMicroelectronics. In addition to that, TELECOM ITALIA is 1.06 times more volatile than STMicroelectronics NV. It trades about -0.07 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of volatility. If you would invest 2,502 in STMicroelectronics NV on October 14, 2024 and sell it today you would lose (51.00) from holding STMicroelectronics NV or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TELECOM ITALIA vs. STMicroelectronics NV
Performance |
| Timeline |
| TELECOM ITALIA |
| STMicroelectronics |
TELECOM ITALIA and STMicroelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TELECOM ITALIA and STMicroelectronics
The main advantage of trading using opposite TELECOM ITALIA and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TELECOM ITALIA position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.| TELECOM ITALIA vs. Ryanair Holdings plc | TELECOM ITALIA vs. Yanzhou Coal Mining | TELECOM ITALIA vs. Eurasia Mining Plc | TELECOM ITALIA vs. CHINA SOUTHN AIR H |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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