Correlation Between Telefonaktiebolaget and Investor
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Investor 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 Telefonaktiebolaget and Investor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonaktiebolaget LM Ericsson and Investor AB ser, you can compare the effects of market volatilities on Telefonaktiebolaget and Investor 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 Telefonaktiebolaget with a short position of Investor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Investor.
Diversification Opportunities for Telefonaktiebolaget and Investor
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and Investor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Investor AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB ser and Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson are associated (or correlated) with Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB ser has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Investor go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Investor
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 1.13 times more return on investment than Investor. However, Telefonaktiebolaget is 1.13 times more volatile than Investor AB ser. It trades about 0.49 of its potential returns per unit of risk. Investor AB ser is currently generating about 0.51 per unit of risk. If you would invest 5,360 in Telefonaktiebolaget LM Ericsson on February 14, 2024 and sell it today you would earn a total of 524.00 from holding Telefonaktiebolaget LM Ericsson or generate 9.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Investor AB ser
Performance |
Timeline |
Telefonaktiebolaget |
Investor AB ser |
Telefonaktiebolaget and Investor Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Telefonaktiebolaget and Investor
The main advantage of trading using opposite Telefonaktiebolaget and Investor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Investor 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 Investor will offset losses from the drop in Investor's long position.Telefonaktiebolaget vs. Trelleborg AB | Telefonaktiebolaget vs. Indutrade AB | Telefonaktiebolaget vs. Vitrolife AB | Telefonaktiebolaget vs. Mycronic publ AB |
Investor vs. Biotage AB | Investor vs. Invisio Communications AB | Investor vs. Vitrolife AB | Investor vs. AddLife AB |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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