Correlation Between Belden and Telefonaktiebolaget

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

By analyzing existing cross correlation between Belden Inc and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Belden and Telefonaktiebolaget 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 Belden with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belden and Telefonaktiebolaget.

Diversification Opportunities for Belden and Telefonaktiebolaget

0.63

Correlation Coefficient

Belden  Telefonaktiebolaget

Poor diversification

The 3 months correlation between Belden and Telefonaktiebolaget is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Belden 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 Belden Inc are associated (or correlated) with Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Belden i.e., Belden and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Belden and Telefonaktiebolaget

Considering the 90-day investment horizon Belden Inc is expected to generate 1.48 times more return on investment than Telefonaktiebolaget. However, Belden is 1.48 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.3 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.31 per unit of risk. If you would invest  8,325  in Belden Inc on February 24, 2024 and sell it today you would earn a total of  1,326  from holding Belden Inc or generate 15.93% return on investment over 90 days.

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

Belden Inc  vs.  Telefonaktiebolaget LM Ericsso

Belden Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Belden Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Belden exhibited solid returns over the last few months and may actually be approaching a breakup point.

Telefonaktiebolaget

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward indicators, Telefonaktiebolaget may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Belden and Telefonaktiebolaget

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

The idea behind Belden Inc and Telefonaktiebolaget LM Ericsson 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 CEOs Directory module to screen CEOs from public companies around the world.