Correlation Between Telecom and CVW CleanTech

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

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

Diversification Opportunities for Telecom and CVW CleanTech

-0.23

Correlation Coefficient

Telecom  CVW CleanTech

Very good diversification

The 3 months correlation between Telecom and CVW is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia Capital and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech and Telecom 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 Capital are associated (or correlated) with CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Telecom i.e., Telecom and CVW CleanTech go up and down completely randomly.

Pair Corralation between Telecom and CVW CleanTech

Assuming the 90 days trading horizon Telecom Italia Capital is expected to under-perform the CVW CleanTech. But the bond apears to be less risky and, when comparing its historical volatility, Telecom Italia Capital is 9.99 times less risky than CVW CleanTech. The bond trades about -0.01 of its potential returns per unit of risk. The CVW CleanTech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  65.00  in CVW CleanTech on December 22, 2024 and sell it today you would lose (4.00) from holding CVW CleanTech or give up 6.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Telecom Italia Capital  vs.  CVW CleanTech

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.

CVW CleanTech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CVW CleanTech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, CVW CleanTech 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 and CVW CleanTech

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

The idea behind Telecom Italia Capital and CVW CleanTech 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.