Correlation Between Telecom Italia and GoldMining

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

Diversification Opportunities for Telecom Italia and GoldMining

-0.26

Correlation Coefficient

Telecom Italia  GoldMining

Very good diversification

The 3 months correlation between Telecom and GoldMining is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining 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 GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Telecom Italia i.e., Telecom Italia and GoldMining go up and down completely randomly.

Pair Corralation between Telecom Italia and GoldMining

Assuming the 90 days trading horizon Telecom Italia SpA is expected to generate 1.04 times more return on investment than GoldMining. However, Telecom Italia is 1.04 times more volatile than GoldMining. It trades about 0.15 of its potential returns per unit of risk. GoldMining is currently generating about 0.05 per unit of risk. If you would invest  29.00  in Telecom Italia SpA on December 30, 2024 and sell it today you would earn a total of  7.00  from holding Telecom Italia SpA or generate 24.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.15%
Values	Daily Returns

Telecom Italia SpA  vs.  GoldMining

Telecom Italia SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telecom Italia unveiled solid returns over the last few months and may actually be approaching a breakup point.

GoldMining

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GoldMining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GoldMining may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Telecom Italia and GoldMining

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

The idea behind Telecom Italia SpA and GoldMining 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.