Correlation Between Axfood AB and Telia Company

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

By analyzing existing cross correlation between Axfood AB and Telia Company AB, you can compare the effects of market volatilities on Axfood AB and Telia Company 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 Axfood AB with a short position of Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axfood AB and Telia Company.

Diversification Opportunities for Axfood AB and Telia Company

-0.11

Correlation Coefficient

Axfood AB  Telia Company

Good diversification

The 3 months correlation between Axfood and Telia is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Axfood AB and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company and Axfood AB 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 Axfood AB are associated (or correlated) with Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Axfood AB i.e., Axfood AB and Telia Company go up and down completely randomly.

Pair Corralation between Axfood AB and Telia Company

Assuming the 90 days trading horizon Axfood AB is expected to under-perform the Telia Company. In addition to that, Axfood AB is 1.18 times more volatile than Telia Company AB. It trades about -0.01 of its total potential returns per unit of risk. Telia Company AB is currently generating about 0.27 per unit of volatility. If you would invest  3,021  in Telia Company AB on December 30, 2024 and sell it today you would earn a total of  583.00  from holding Telia Company AB or generate 19.3% return on investment over 90 days.

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

Axfood AB  vs.  Telia Company AB

Axfood AB

Risk-Adjusted Performance

Very Weak

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

Telia Company

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telia Company AB are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Telia Company unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axfood AB and Telia Company

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

The idea behind Axfood AB and Telia Company AB 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.