Correlation Between Luxfer Holdings and Telecom

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

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

Diversification Opportunities for Luxfer Holdings and Telecom

0.01

Correlation Coefficient

Luxfer Holdings  Telecom

Significant diversification

The 3 months correlation between Luxfer and Telecom is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Luxfer Holdings PLC 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 Luxfer Holdings 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 Luxfer Holdings PLC 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 Luxfer Holdings i.e., Luxfer Holdings and Telecom go up and down completely randomly.

Pair Corralation between Luxfer Holdings and Telecom

Given the investment horizon of 90 days Luxfer Holdings PLC is expected to under-perform the Telecom. In addition to that, Luxfer Holdings is 4.21 times more volatile than Telecom Italia Capital. It trades about -0.23 of its total potential returns per unit of risk. Telecom Italia Capital is currently generating about -0.2 per unit of volatility. If you would invest  10,282  in Telecom Italia Capital on September 24, 2024 and sell it today you would lose (204.00) from holding Telecom Italia Capital or give up 1.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Luxfer Holdings PLC  vs.  Telecom Italia Capital

Luxfer Holdings PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings 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 Luxfer Holdings and Telecom

The main advantage of trading using opposite Luxfer Holdings and Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Luxfer Holdings 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 Luxfer Holdings PLC 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.