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Analysis of the correlation between stocks and benchmark

What is a benchmark? A benchmark is nothing but a series of historical reference, usually this is another sign of market or industry, but you can put a stock in connection with another stock.

In the following charts the black line indicates the stock to be analyzed, while the red line is the benchmark (index SpMib):

  • Capitalia - SpMib

Capitalia and index SpMib

  • Telecom - SpMib

Telecom Italia and index SpMib

  • Eni - SpMib

Eni and index SpMib

Capitalia had a performance record and has almost performed better than the index SpMib, while Telecom Italia has been decidedly worse.

The most interesting is certainly the third chart, where in addition to excellent performance of Eni, we can also note the movement of two almost identical charts.
However in the last period seems that this similarity is the route. Indeed, Eni after a triple maximum began a corrective phase, while the index SpMib continued the bullish phase probably backed by other stocks.

We have the confirmation that this similarity between Eni and the index SpMib has route, with the calculation of correlation:

Correlation between Eni and the index SpMib

From December 2005 the correlation has begun to decline and in February 2006 has plummeted to just over 0.5.


Excel software containing the data for analysis:
Trading with excel Eni-SpMib (trading with excel)

Forex Chart