Correlation Between TELECOM ITALIA and CGN Power

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

By analyzing existing cross correlation between TELECOM ITALIA and CGN Power Co, you can compare the effects of market volatilities on TELECOM ITALIA and CGN Power 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 CGN Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELECOM ITALIA and CGN Power.

Diversification Opportunities for TELECOM ITALIA and CGN Power

-0.2

Correlation Coefficient

TELECOM ITALIA  CGN Power

Good diversification

The 3 months correlation between TELECOM and CGN is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM ITALIA and CGN Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGN Power 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 are associated (or correlated) with CGN Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGN Power has no effect on the direction of TELECOM ITALIA i.e., TELECOM ITALIA and CGN Power go up and down completely randomly.

Pair Corralation between TELECOM ITALIA and CGN Power

If you would invest  24.00  in TELECOM ITALIA on October 11, 2024 and sell it today you would earn a total of  2.00  from holding TELECOM ITALIA or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

TELECOM ITALIA  vs.  CGN Power Co

TELECOM ITALIA

Risk-Adjusted Performance

4 of 100

Insignificant

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

CGN Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CGN Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CGN Power is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TELECOM ITALIA and CGN Power

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

The idea behind TELECOM ITALIA and CGN Power Co 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.