Correlation Between ATMA Participaes and Telefonaktiebolaget

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

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

Diversification Opportunities for ATMA Participaes and Telefonaktiebolaget

-0.53

Correlation Coefficient

ATMA Participaes  Telefonaktiebolaget

Excellent diversification

The 3 months correlation between ATMA and Telefonaktiebolaget is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding ATMA Participaes SA and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and ATMA Participaes 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 ATMA Participaes SA 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 ATMA Participaes i.e., ATMA Participaes and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between ATMA Participaes and Telefonaktiebolaget

Assuming the 90 days trading horizon ATMA Participaes SA is expected to under-perform the Telefonaktiebolaget. In addition to that, ATMA Participaes is 1.51 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.01 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.11 per unit of volatility. If you would invest  2,036  in Telefonaktiebolaget LM Ericsson on August 30, 2024 and sell it today you would earn a total of  280.00  from holding Telefonaktiebolaget LM Ericsson or generate 13.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

ATMA Participaes SA  vs.  Telefonaktiebolaget LM Ericsso

ATMA Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATMA Participaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ATMA Participaes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Telefonaktiebolaget

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ATMA Participaes and Telefonaktiebolaget

The main advantage of trading using opposite ATMA Participaes and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATMA Participaes 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 ATMA Participaes SA 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.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.