Correlation Between AAC Clyde and Telefonaktiebolaget

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

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

Diversification Opportunities for AAC Clyde and Telefonaktiebolaget

-0.03

Correlation Coefficient

AAC Clyde  Telefonaktiebolaget

Good diversification

The 3 months correlation between AAC and Telefonaktiebolaget is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding AAC Clyde Space and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and AAC Clyde 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 AAC Clyde Space 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 AAC Clyde i.e., AAC Clyde and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between AAC Clyde and Telefonaktiebolaget

Assuming the 90 days trading horizon AAC Clyde Space is expected to generate 1.32 times more return on investment than Telefonaktiebolaget. However, AAC Clyde is 1.32 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.09 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.01 per unit of risk. If you would invest  4,800  in AAC Clyde Space on November 29, 2024 and sell it today you would earn a total of  640.00  from holding AAC Clyde Space or generate 13.33% return on investment over 90 days.

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

AAC Clyde Space  vs.  Telefonaktiebolaget LM Ericsso

AAC Clyde Space

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC Clyde Space are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, AAC Clyde unveiled solid returns over the last few months and may actually be approaching a breakup point.

Telefonaktiebolaget

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Telefonaktiebolaget is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AAC Clyde and Telefonaktiebolaget

The main advantage of trading using opposite AAC Clyde and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAC Clyde 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 AAC Clyde Space 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.