Correlation Between Lumia and Telecom

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

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

Diversification Opportunities for Lumia and Telecom

0.15

Correlation Coefficient

Lumia  Telecom

Average diversification

The 3 months correlation between Lumia and Telecom is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Lumia 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 Lumia 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 Lumia 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 Lumia i.e., Lumia and Telecom go up and down completely randomly.

Pair Corralation between Lumia and Telecom

Assuming the 90 days trading horizon Lumia is expected to under-perform the Telecom. In addition to that, Lumia is 12.47 times more volatile than Telecom Italia Capital. It trades about -0.2 of its total potential returns per unit of risk. Telecom Italia Capital is currently generating about 0.01 per unit of volatility. If you would invest  10,343  in Telecom Italia Capital on December 24, 2024 and sell it today you would earn a total of  18.00  from holding Telecom Italia Capital or generate 0.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Lumia  vs.  Telecom Italia Capital

Lumia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Lumia shareholders.

Telecom Italia Capital

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lumia and Telecom

The main advantage of trading using opposite Lumia and Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumia 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 Lumia 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.