Correlation Between Telecom Italia and JD Sports

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

Diversification Opportunities for Telecom Italia and JD Sports

0.36

Correlation Coefficient

Telecom Italia  JD Sports

Weak diversification

The 3 months correlation between Telecom and JD Sports is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Telecom Italia SpA and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Telecom Italia i.e., Telecom Italia and JD Sports go up and down completely randomly.

Pair Corralation between Telecom Italia and JD Sports

Assuming the 90 days trading horizon Telecom Italia is expected to generate 1.04 times less return on investment than JD Sports. But when comparing it to its historical volatility, Telecom Italia SpA is 1.39 times less risky than JD Sports. It trades about 0.13 of its potential returns per unit of risk. JD Sports Fashion is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,816  in JD Sports Fashion on April 24, 2025 and sell it today you would earn a total of  1,162  from holding JD Sports Fashion or generate 14.87% return on investment over 90 days.

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

Telecom Italia SpA  vs.  JD Sports Fashion

Telecom Italia SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telecom Italia SpA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Telecom Italia unveiled solid returns over the last few months and may actually be approaching a breakup point.

JD Sports Fashion

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JD Sports Fashion are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, JD Sports exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telecom Italia and JD Sports

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

The idea behind Telecom Italia SpA and JD Sports Fashion 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.