Correlation Between Telecom Italia and Anglesey Mining

Can any of the company-specific risk be diversified away by investing in both Telecom Italia and Anglesey Mining 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 Anglesey Mining 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 Anglesey Mining, you can compare the effects of market volatilities on Telecom Italia and Anglesey Mining 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 Anglesey Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telecom Italia and Anglesey Mining.

Diversification Opportunities for Telecom Italia and Anglesey Mining

0.26

Correlation Coefficient

Telecom Italia  Anglesey Mining

Modest diversification

The 3 months correlation between Telecom and Anglesey is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Anglesey Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglesey Mining 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 Anglesey Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglesey Mining has no effect on the direction of Telecom Italia i.e., Telecom Italia and Anglesey Mining go up and down completely randomly.

Pair Corralation between Telecom Italia and Anglesey Mining

Assuming the 90 days trading horizon Telecom Italia SpA is expected to under-perform the Anglesey Mining. In addition to that, Telecom Italia is 1.03 times more volatile than Anglesey Mining. It trades about -0.31 of its total potential returns per unit of risk. Anglesey Mining is currently generating about -0.17 per unit of volatility. If you would invest  106.00  in Anglesey Mining on August 11, 2024 and sell it today you would lose (8.00) from holding Anglesey Mining or give up 7.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Telecom Italia SpA  vs.  Anglesey Mining

Telecom Italia SpA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Telecom Italia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Anglesey Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglesey Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Anglesey Mining exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Italia and Anglesey Mining

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

The idea behind Telecom Italia SpA and Anglesey Mining 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.