Correlation Between Saipem SpA and Magyar Telekom

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

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

Diversification Opportunities for Saipem SpA and Magyar Telekom

0.86

Correlation Coefficient

Saipem SpA  Magyar Telekom

Very poor diversification

The 3 months correlation between Saipem and Magyar is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Magyar Telekom Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magyar Telekom Plc and Saipem SpA 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 Saipem SpA are associated (or correlated) with Magyar Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magyar Telekom Plc has no effect on the direction of Saipem SpA i.e., Saipem SpA and Magyar Telekom go up and down completely randomly.

Pair Corralation between Saipem SpA and Magyar Telekom

Assuming the 90 days horizon Saipem SpA is expected to generate 1.54 times less return on investment than Magyar Telekom. In addition to that, Saipem SpA is 1.45 times more volatile than Magyar Telekom Plc. It trades about 0.05 of its total potential returns per unit of risk. Magyar Telekom Plc is currently generating about 0.12 per unit of volatility. If you would invest  411.00  in Magyar Telekom Plc on September 26, 2024 and sell it today you would earn a total of  1,153  from holding Magyar Telekom Plc or generate 280.54% return on investment over 90 days.

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

Saipem SpA  vs.  Magyar Telekom Plc

Saipem SpA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Saipem SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Magyar Telekom Plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Magyar Telekom Plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Magyar Telekom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Saipem SpA and Magyar Telekom

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

The idea behind Saipem SpA and Magyar Telekom 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.