Correlation Between Telecom Italia and Pentair PLC

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

Diversification Opportunities for Telecom Italia and Pentair PLC

0.92

Correlation Coefficient

Telecom Italia  Pentair PLC

Almost no diversification

The 3 months correlation between Telecom and Pentair is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and Pentair PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentair PLC 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 Pentair PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentair PLC has no effect on the direction of Telecom Italia i.e., Telecom Italia and Pentair PLC go up and down completely randomly.

Pair Corralation between Telecom Italia and Pentair PLC

Assuming the 90 days trading horizon Telecom Italia is expected to generate 1.13 times less return on investment than Pentair PLC. In addition to that, Telecom Italia is 1.31 times more volatile than Pentair PLC. It trades about 0.17 of its total potential returns per unit of risk. Pentair PLC is currently generating about 0.25 per unit of volatility. If you would invest  8,540  in Pentair PLC on April 22, 2025 and sell it today you would earn a total of  2,046  from holding Pentair PLC or generate 23.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.83%
Values	Daily Returns

Telecom Italia SpA  vs.  Pentair PLC

Telecom Italia SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Telecom Italia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pentair PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pentair PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pentair PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Italia and Pentair PLC

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

The idea behind Telecom Italia SpA and Pentair PLC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.