Correlation Between Highlight Communications and TELECOM ITALIA
Can any of the company-specific risk be diversified away by investing in both Highlight Communications 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 Highlight Communications and TELECOM ITALIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and TELECOM ITALIA, you can compare the effects of market volatilities on Highlight Communications 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 Highlight Communications with a short position of TELECOM ITALIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and TELECOM ITALIA.
Diversification Opportunities for Highlight Communications and TELECOM ITALIA
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Highlight and TELECOM is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and TELECOM ITALIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM ITALIA and Highlight Communications 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 Highlight Communications AG 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 Highlight Communications i.e., Highlight Communications and TELECOM ITALIA go up and down completely randomly.
Pair Corralation between Highlight Communications and TELECOM ITALIA
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 1.65 times more return on investment than TELECOM ITALIA. However, Highlight Communications is 1.65 times more volatile than TELECOM ITALIA. It trades about 0.09 of its potential returns per unit of risk. TELECOM ITALIA is currently generating about 0.11 per unit of risk. If you would invest 123.00 in Highlight Communications AG on September 5, 2025 and sell it today you would earn a total of 20.00 from holding Highlight Communications AG or generate 16.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. TELECOM ITALIA
Performance |
| Timeline |
| Highlight Communications |
| TELECOM ITALIA |
Highlight Communications and TELECOM ITALIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and TELECOM ITALIA
The main advantage of trading using opposite Highlight Communications and TELECOM ITALIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications 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 Highlight Communications AG 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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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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