Correlation Between Telecom Italia and Tungsten West

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

Diversification Opportunities for Telecom Italia and Tungsten West

0.05

Correlation Coefficient

Telecom Italia  Tungsten West

Significant diversification

The 3 months correlation between Telecom and Tungsten is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Tungsten West PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tungsten West PLC 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 Tungsten West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tungsten West PLC has no effect on the direction of Telecom Italia i.e., Telecom Italia and Tungsten West go up and down completely randomly.

Pair Corralation between Telecom Italia and Tungsten West

Assuming the 90 days trading horizon Telecom Italia is expected to generate 19.12 times less return on investment than Tungsten West. But when comparing it to its historical volatility, Telecom Italia SpA is 3.19 times less risky than Tungsten West. It trades about 0.01 of its potential returns per unit of risk. Tungsten West PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  140.00  in Tungsten West PLC on September 4, 2024 and sell it today you would earn a total of  160.00  from holding Tungsten West PLC or generate 114.29% 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.  Tungsten West PLC

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.

Tungsten West PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tungsten West PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tungsten West may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telecom Italia and Tungsten West

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

The idea behind Telecom Italia SpA and Tungsten West PLC 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..