Correlation Between Telecom Italia and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Southwest Airlines 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 Southwest Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telecom Italia SpA and Southwest Airlines Co, you can compare the effects of market volatilities on Telecom Italia and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Southwest Airlines.
Diversification Opportunities for Telecom Italia and Southwest Airlines
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Telecom and Southwest is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 SpA are associated (or correlated) with Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Telecom Italia i.e., Telecom Italia and Southwest Airlines go up and down completely randomly.
Pair Corralation between Telecom Italia and Southwest Airlines
Assuming the 90 days trading horizon Telecom Italia SpA is expected to generate 1.34 times more return on investment than Southwest Airlines. However, Telecom Italia is 1.34 times more volatile than Southwest Airlines Co. It trades about 0.05 of its potential returns per unit of risk. Southwest Airlines Co is currently generating about 0.01 per unit of risk. If you would invest 18.00 in Telecom Italia SpA on June 21, 2024 and sell it today you would earn a total of 11.00 from holding Telecom Italia SpA or generate 61.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.79% |
Values | Daily Returns |
Telecom Italia SpA vs. Southwest Airlines Co
Performance |
Timeline |
Telecom Italia SpA |
Southwest Airlines |
Telecom Italia and Southwest Airlines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Telecom Italia and Southwest Airlines
The main advantage of trading using opposite Telecom Italia and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telecom Italia position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.Telecom Italia vs. Hyundai Motor | Telecom Italia vs. Samsung Electronics Co | Telecom Italia vs. Samsung Electronics Co | Telecom Italia vs. Halyk Bank of |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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