Correlation Between Globalfoundries and Telecom

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

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

Diversification Opportunities for Globalfoundries and Telecom

0.34

Correlation Coefficient

Globalfoundries  Telecom

Weak diversification

The 3 months correlation between Globalfoundries and Telecom is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Globalfoundries and Telecom Italia Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia Capital and Globalfoundries 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 Globalfoundries are associated (or correlated) with Telecom. 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 Capital has no effect on the direction of Globalfoundries i.e., Globalfoundries and Telecom go up and down completely randomly.

Pair Corralation between Globalfoundries and Telecom

Considering the 90-day investment horizon Globalfoundries is expected to generate 5.4 times more return on investment than Telecom. However, Globalfoundries is 5.4 times more volatile than Telecom Italia Capital. It trades about 0.05 of its potential returns per unit of risk. Telecom Italia Capital is currently generating about -0.07 per unit of risk. If you would invest  4,031  in Globalfoundries on October 10, 2024 and sell it today you would earn a total of  323.00  from holding Globalfoundries or generate 8.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Globalfoundries  vs.  Telecom Italia Capital

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Telecom Italia Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telecom Italia Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Globalfoundries and Telecom

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

The idea behind Globalfoundries and Telecom Italia Capital 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.