Correlation Between TELECOM ITALIA and CHINA RECYCL

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

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

Diversification Opportunities for TELECOM ITALIA and CHINA RECYCL

0.0

Correlation Coefficient

TELECOM ITALIA  CHINA RECYCL

Pay attention - limited upside

The 3 months correlation between TELECOM and CHINA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM ITALIA and CHINA RECYCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA RECYCL 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 CHINA RECYCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA RECYCL has no effect on the direction of TELECOM ITALIA i.e., TELECOM ITALIA and CHINA RECYCL go up and down completely randomly.

Pair Corralation between TELECOM ITALIA and CHINA RECYCL

If you would invest  24.00  in TELECOM ITALIA on December 20, 2024 and sell it today you would earn a total of  6.00  from holding TELECOM ITALIA or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

TELECOM ITALIA  vs.  CHINA RECYCL

TELECOM ITALIA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TELECOM ITALIA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TELECOM ITALIA unveiled solid returns over the last few months and may actually be approaching a breakup point.

CHINA RECYCL

Risk-Adjusted Performance

Very Weak

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

Pair Trading with TELECOM ITALIA and CHINA RECYCL

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

The idea behind TELECOM ITALIA and CHINA RECYCL 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.