Correlation Between Telecom Italia and Sunny Optical

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

Diversification Opportunities for Telecom Italia and Sunny Optical

0.26

Correlation Coefficient

Telecom Italia  Sunny Optical

Modest diversification

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

Pair Corralation between Telecom Italia and Sunny Optical

Assuming the 90 days trading horizon Telecom Italia is expected to generate 2.99 times less return on investment than Sunny Optical. But when comparing it to its historical volatility, Telecom Italia SpA is 1.34 times less risky than Sunny Optical. It trades about 0.06 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,300  in Sunny Optical Technology on October 4, 2024 and sell it today you would earn a total of  2,720  from holding Sunny Optical Technology or generate 63.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Telecom Italia SpA  vs.  Sunny Optical Technology

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.

Sunny Optical Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sunny Optical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Italia and Sunny Optical

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

The idea behind Telecom Italia SpA and Sunny Optical Technology 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.