Correlation Between Ametek and Telecom Italia

Can any of the company-specific risk be diversified away by investing in both Ametek and Telecom Italia 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 Ametek and Telecom Italia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ametek Inc and Telecom Italia SpA, you can compare the effects of market volatilities on Ametek and Telecom Italia 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 Ametek with a short position of Telecom Italia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ametek and Telecom Italia.

Diversification Opportunities for Ametek and Telecom Italia

-0.06

Correlation Coefficient

Ametek  Telecom Italia

Good diversification

The 3 months correlation between Ametek and Telecom is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Ametek Inc and Telecom Italia SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia SpA and Ametek 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 Ametek Inc are associated (or correlated) with Telecom Italia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia SpA has no effect on the direction of Ametek i.e., Ametek and Telecom Italia go up and down completely randomly.

Pair Corralation between Ametek and Telecom Italia

Assuming the 90 days trading horizon Ametek Inc is expected to under-perform the Telecom Italia. But the stock apears to be less risky and, when comparing its historical volatility, Ametek Inc is 2.2 times less risky than Telecom Italia. The stock trades about -0.04 of its potential returns per unit of risk. The Telecom Italia SpA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Telecom Italia SpA on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Telecom Italia SpA or generate 17.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Ametek Inc  vs.  Telecom Italia SpA

Ametek Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ametek Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ametek is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Telecom Italia SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 9 (%) 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.

Pair Trading with Ametek and Telecom Italia

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

The idea behind Ametek Inc and Telecom Italia SpA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.