Correlation Between Flexible Solutions and Telecom

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

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

Diversification Opportunities for Flexible Solutions and Telecom

0.05

Correlation Coefficient

Flexible Solutions  Telecom

Significant diversification

The 3 months correlation between Flexible and Telecom is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Flexible Solutions Internation and Telecom Italia Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecom Italia Capital and Flexible Solutions 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 Flexible Solutions International are associated (or correlated) with Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecom Italia Capital has no effect on the direction of Flexible Solutions i.e., Flexible Solutions and Telecom go up and down completely randomly.

Pair Corralation between Flexible Solutions and Telecom

Considering the 90-day investment horizon Flexible Solutions International is expected to generate 1.77 times more return on investment than Telecom. However, Flexible Solutions is 1.77 times more volatile than Telecom Italia Capital. It trades about 0.03 of its potential returns per unit of risk. Telecom Italia Capital is currently generating about -0.14 per unit of risk. If you would invest  343.00  in Flexible Solutions International on September 24, 2024 and sell it today you would earn a total of  12.00  from holding Flexible Solutions International or generate 3.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Flexible Solutions Internation  vs.  Telecom Italia Capital

Flexible Solutions

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telecom Italia Capital

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for Telecom Italia Capital investors.

Pair Trading with Flexible Solutions and Telecom

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

The idea behind Flexible Solutions International and Telecom Italia Capital 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.