Correlation Between Telecom Italia and Zanaga Iron

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

Diversification Opportunities for Telecom Italia and Zanaga Iron

0.3

Correlation Coefficient

Telecom Italia  Zanaga Iron

Weak diversification

The 3 months correlation between Telecom and Zanaga is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Zanaga Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zanaga Iron Ore 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 Zanaga Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zanaga Iron Ore has no effect on the direction of Telecom Italia i.e., Telecom Italia and Zanaga Iron go up and down completely randomly.

Pair Corralation between Telecom Italia and Zanaga Iron

Assuming the 90 days trading horizon Telecom Italia is expected to generate 5.01 times less return on investment than Zanaga Iron. But when comparing it to its historical volatility, Telecom Italia SpA is 3.61 times less risky than Zanaga Iron. It trades about 0.2 of its potential returns per unit of risk. Zanaga Iron Ore is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  411.00  in Zanaga Iron Ore on September 13, 2024 and sell it today you would earn a total of  263.00  from holding Zanaga Iron Ore or generate 63.99% return on investment over 90 days.

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

Telecom Italia SpA  vs.  Zanaga Iron Ore

Telecom Italia SpA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Zanaga Iron Ore

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zanaga Iron Ore are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zanaga Iron unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Italia and Zanaga Iron

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

The idea behind Telecom Italia SpA and Zanaga Iron Ore 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.