Correlation Between TELECOM ITALRISP and Hitachi Zosen

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

By analyzing existing cross correlation between TELECOM ITALRISP ADR10 and Hitachi Zosen, you can compare the effects of market volatilities on TELECOM ITALRISP and Hitachi Zosen 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 ITALRISP with a short position of Hitachi Zosen. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELECOM ITALRISP and Hitachi Zosen.

Diversification Opportunities for TELECOM ITALRISP and Hitachi Zosen

-0.04

Correlation Coefficient

TELECOM ITALRISP  Hitachi Zosen

Good diversification

The 3 months correlation between TELECOM and Hitachi is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding TELECOM ITALRISP ADR10 and Hitachi Zosen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Zosen and TELECOM ITALRISP 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 ITALRISP ADR10 are associated (or correlated) with Hitachi Zosen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Zosen has no effect on the direction of TELECOM ITALRISP i.e., TELECOM ITALRISP and Hitachi Zosen go up and down completely randomly.

Pair Corralation between TELECOM ITALRISP and Hitachi Zosen

Assuming the 90 days trading horizon TELECOM ITALRISP ADR10 is expected to generate 0.87 times more return on investment than Hitachi Zosen. However, TELECOM ITALRISP ADR10 is 1.14 times less risky than Hitachi Zosen. It trades about -0.02 of its potential returns per unit of risk. Hitachi Zosen is currently generating about -0.02 per unit of risk. If you would invest  284.00  in TELECOM ITALRISP ADR10 on October 10, 2024 and sell it today you would lose (8.00) from holding TELECOM ITALRISP ADR10 or give up 2.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

TELECOM ITALRISP ADR10  vs.  Hitachi Zosen

TELECOM ITALRISP ADR10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELECOM ITALRISP ADR10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, TELECOM ITALRISP is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Hitachi Zosen

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with TELECOM ITALRISP and Hitachi Zosen

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

The idea behind TELECOM ITALRISP ADR10 and Hitachi Zosen 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..