Correlation Between Telecom Italia and GSTechnologies

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

Diversification Opportunities for Telecom Italia and GSTechnologies

0.16

Correlation Coefficient

Telecom Italia  GSTechnologies

Average diversification

The 3 months correlation between Telecom and GSTechnologies is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and GSTechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSTechnologies 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 GSTechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSTechnologies has no effect on the direction of Telecom Italia i.e., Telecom Italia and GSTechnologies go up and down completely randomly.

Pair Corralation between Telecom Italia and GSTechnologies

Assuming the 90 days trading horizon Telecom Italia is expected to generate 7.83 times less return on investment than GSTechnologies. But when comparing it to its historical volatility, Telecom Italia SpA is 2.75 times less risky than GSTechnologies. It trades about 0.23 of its potential returns per unit of risk. GSTechnologies is currently generating about 0.65 of returns per unit of risk over similar time horizon. If you would invest  125.00  in GSTechnologies on October 4, 2024 and sell it today you would earn a total of  165.00  from holding GSTechnologies or generate 132.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Telecom Italia SpA  vs.  GSTechnologies

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

GSTechnologies

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GSTechnologies are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GSTechnologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Italia and GSTechnologies

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

The idea behind Telecom Italia SpA and GSTechnologies 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.