Correlation Between Comtech Telecommunicatio and Telefonaktiebolaget

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

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

Diversification Opportunities for Comtech Telecommunicatio and Telefonaktiebolaget

0.07

Correlation Coefficient

Comtech Telecommunicatio  Telefonaktiebolaget

Significant diversification

The 3 months correlation between Comtech and Telefonaktiebolaget is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Comtech Telecommunications Cor and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Comtech Telecommunicatio 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 Comtech Telecommunications Corp 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 Comtech Telecommunicatio i.e., Comtech Telecommunicatio and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Comtech Telecommunicatio and Telefonaktiebolaget

Given the investment horizon of 90 days Comtech Telecommunications Corp is expected to under-perform the Telefonaktiebolaget. In addition to that, Comtech Telecommunicatio is 6.49 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.02 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.02 per unit of volatility. If you would invest  846.00  in Telefonaktiebolaget LM Ericsson on October 21, 2024 and sell it today you would earn a total of  8.00  from holding Telefonaktiebolaget LM Ericsson or generate 0.95% return on investment over 90 days.

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

Comtech Telecommunications Cor  vs.  Telefonaktiebolaget LM Ericsso

Comtech Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Comtech Telecommunications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Telefonaktiebolaget

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Telefonaktiebolaget is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Comtech Telecommunicatio and Telefonaktiebolaget

The main advantage of trading using opposite Comtech Telecommunicatio and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Comtech Telecommunicatio 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 Comtech Telecommunications Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.