Correlation Between Telefonaktiebolaget and ATMA Participaes

Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and ATMA Participaes 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 ATMA Participaes 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 ATMA Participaes SA, you can compare the effects of market volatilities on Telefonaktiebolaget and ATMA Participaes 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 ATMA Participaes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and ATMA Participaes.

Diversification Opportunities for Telefonaktiebolaget and ATMA Participaes

-0.09

Correlation Coefficient

Telefonaktiebolaget  ATMA Participaes

Good diversification

The 3 months correlation between Telefonaktiebolaget and ATMA is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and ATMA Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATMA Participaes 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 ATMA Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATMA Participaes has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and ATMA Participaes go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and ATMA Participaes

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to under-perform the ATMA Participaes. In addition to that, Telefonaktiebolaget is 2.53 times more volatile than ATMA Participaes SA. It trades about -0.15 of its total potential returns per unit of risk. ATMA Participaes SA is currently generating about -0.03 per unit of volatility. If you would invest  115.00  in ATMA Participaes SA on November 19, 2024 and sell it today you would lose (1.00) from holding ATMA Participaes SA or give up 0.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  ATMA Participaes SA

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 basic indicators, Telefonaktiebolaget is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ATMA Participaes

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Telefonaktiebolaget and ATMA Participaes

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

The idea behind Telefonaktiebolaget LM Ericsson and ATMA Participaes SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .