Correlation Between PENN NATL and TELECOM ITALIA

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

By analyzing existing cross correlation between PENN NATL GAMING and TELECOM ITALIA, you can compare the effects of market volatilities on PENN NATL and TELECOM ITALIA 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 PENN NATL with a short position of TELECOM ITALIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PENN NATL and TELECOM ITALIA.

Diversification Opportunities for PENN NATL and TELECOM ITALIA

0.69

Correlation Coefficient

PENN NATL  TELECOM ITALIA

Poor diversification

The 3 months correlation between PENN and TELECOM is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding PENN NATL GAMING and TELECOM ITALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALIA and PENN NATL 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 PENN NATL GAMING are associated (or correlated) with TELECOM ITALIA. 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 has no effect on the direction of PENN NATL i.e., PENN NATL and TELECOM ITALIA go up and down completely randomly.

Pair Corralation between PENN NATL and TELECOM ITALIA

Assuming the 90 days trading horizon PENN NATL is expected to generate 1.1 times less return on investment than TELECOM ITALIA. In addition to that, PENN NATL is 1.5 times more volatile than TELECOM ITALIA. It trades about 0.11 of its total potential returns per unit of risk. TELECOM ITALIA is currently generating about 0.17 per unit of volatility. If you would invest  33.00  in TELECOM ITALIA on April 24, 2025 and sell it today you would earn a total of  7.00  from holding TELECOM ITALIA or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

PENN NATL GAMING  vs.  TELECOM ITALIA

PENN NATL GAMING

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PENN NATL GAMING are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, PENN NATL exhibited solid returns over the last few months and may actually be approaching a breakup point.

TELECOM ITALIA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TELECOM ITALIA 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.

Pair Trading with PENN NATL and TELECOM ITALIA

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

The idea behind PENN NATL GAMING and TELECOM ITALIA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.