Effects of Italian Politics on VIX, 3 Stocks to Watch

Effects of Italian Politics on VIX, 3 Stocks to Watch

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Markets reacted negatively to the uncertainty surrounding Italian elections on Monday. The S&P 500, Dow, and Nasdaq were all down around 1% at the close. The root of this decline came from a senatorial election in the Euro Zone's third largest economy, which showed no party holding a majority.

If parliament remains split, Italy’s ability to maintain its reform policies will be called into question. This could endanger the stability of the Euro as a whole.  The Euro fell against the Dollar following the news to $1.31.

VIX

Another result coming from the non-result in Italy was a 25% increase in the CBOE Volatility Index (VIX). The VIX is commonly known as the "fear index" since it's a measurement of expected volatility for the 30 days to come. The VIX closed around 18, which is still a relatively low value, however if Italian electoral woes continue it is possible that the VIX may continue to rise.

Investing Ideas

Keeping in mind this jump in the VIX, we decided to run a screen for large cap stocks ($10B+), for stability, with high VIX readings in case Italian politics continue to drive the “fear index” up. Stocks with a high VIX typically outperform when volatility and fear spikes. This means that with more uncertainty in the market, these stocks tend to perform well.

Do you think a majority will be elected to parliament in Italy calming any additional uncertainty surrounding the Euro? Or will fractured politics jeopardize the stability of the European economy? If the latter occurs, this list may be a good place to start for investing ideas.  

Use the Turbo Chart to see performance of AAPL, CEO, and CHL over the last year:

1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $423.34B, most recent closing price at $450.81. Correlation with the VIX index at 0.508 over the last 60 days.

 

2. CNOOC Ltd. (CEO, Earnings, Analysts, Financials): Engages in the exploration, development, production, and sale of crude oil, natural gas, and other petroleum products. Market cap at $88.55B, most recent closing price at $198.33. Correlation with the VIX index at 0.51 over the last 60 days.
 

3. China Mobile Limited (CHL, Earnings, Analysts, Financials): Provides mobile telecommunications and related services primarily in the Mainland China. Market cap at $223.24B, most recent closing price at $55.53. Correlation with the VIX index at 0.509 over the last 60 days.
 

 

Also included is a list of all Italian companies traded on the NYSE.

Use the Compar-O-Matic to analyze monthly return over the last 2 years on Italian based stocks

1. Eni SpA (E, Earnings, Analysts, Financials): Engages in the exploration, production, transportation, transformation, and marketing of oil and natural gas. Market cap at $84.29B, most recent closing price at $46.39.

 

2. Gentium S.p.A (GENT, Earnings, Analysts, Financials): Focuses on the development and manufacture of its primary product candidate, defibrotide, an investigational drug based on a mixture of single-stranded and double-stranded DNA extracted from pig intestines. Market cap at $144.34M, most recent closing price at $9.61.
 

3. Luxottica Group SpA (LUX, Earnings, Analysts, Financials): Provides luxury and sport/performance eyewear worldwide. Market cap at $21.64B, most recent closing price at $45.68.
 

4. Natuzzi SpA (NTZ, Earnings, Analysts, Financials): Engages in the design, manufacture, and marketing of leather and fabric-upholstered furniture. Market cap at $123.41M, most recent closing price at $2.25.
 

5. Telecom Italia SpA (TI, Earnings, Analysts, Financials): Provides fixed-line and mobile telecommunications, Internet, and media services. Market cap at $15.17B, most recent closing price at $7.80.
 

 

(Written by Ryan Horch)

 

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