Correlation Between Telecom Italia and Cardinal Health

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

Diversification Opportunities for Telecom Italia and Cardinal Health

-0.43

Correlation Coefficient

Telecom Italia  Cardinal Health

Very good diversification

The 3 months correlation between Telecom and Cardinal is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Telecom Italia i.e., Telecom Italia and Cardinal Health go up and down completely randomly.

Pair Corralation between Telecom Italia and Cardinal Health

Assuming the 90 days trading horizon Telecom Italia is expected to generate 1.27 times less return on investment than Cardinal Health. In addition to that, Telecom Italia is 2.02 times more volatile than Cardinal Health. It trades about 0.03 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.07 per unit of volatility. If you would invest  7,409  in Cardinal Health on October 4, 2024 and sell it today you would earn a total of  4,436  from holding Cardinal Health or generate 59.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.4%
Values	Daily Returns

Telecom Italia SpA  vs.  Cardinal Health

Telecom Italia SpA

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Telecom Italia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cardinal Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cardinal Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Telecom Italia and Cardinal Health

The main advantage of trading using opposite Telecom Italia and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.

The idea behind Telecom Italia SpA and Cardinal Health 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.