Correlation Between Enersize and Telefonaktiebolaget

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

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

Diversification Opportunities for Enersize and Telefonaktiebolaget

0.15

Correlation Coefficient

Enersize  Telefonaktiebolaget

Average diversification

The 3 months correlation between Enersize and Telefonaktiebolaget is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Enersize Oy and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Enersize 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 Enersize Oy 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 Enersize i.e., Enersize and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Enersize and Telefonaktiebolaget

Assuming the 90 days trading horizon Enersize is expected to generate 1.47 times less return on investment than Telefonaktiebolaget. In addition to that, Enersize is 4.02 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.03 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.18 per unit of volatility. If you would invest  7,517  in Telefonaktiebolaget LM Ericsson on August 30, 2024 and sell it today you would earn a total of  1,411  from holding Telefonaktiebolaget LM Ericsson or generate 18.77% return on investment over 90 days.

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

Enersize Oy  vs.  Telefonaktiebolaget LM Ericsso

Enersize Oy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enersize Oy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Enersize may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Telefonaktiebolaget

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enersize and Telefonaktiebolaget

The main advantage of trading using opposite Enersize and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enersize 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 Enersize Oy 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.