Correlation Between Telefonaktiebolaget and TELES Informationstech

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

Diversification Opportunities for Telefonaktiebolaget and TELES Informationstech

0.35

Correlation Coefficient

Telefonaktiebolaget  TELES Informationstech

Weak diversification

The 3 months correlation between Telefonaktiebolaget and TELES is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and TELES Informationstechnologien in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELES Informationstech 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 TELES Informationstech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELES Informationstech has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and TELES Informationstech go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and TELES Informationstech

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.5 times more return on investment than TELES Informationstech. However, Telefonaktiebolaget LM Ericsson is 1.99 times less risky than TELES Informationstech. It trades about 0.03 of its potential returns per unit of risk. TELES Informationstechnologien AG is currently generating about -0.12 per unit of risk. If you would invest  764.00  in Telefonaktiebolaget LM Ericsson on December 1, 2024 and sell it today you would earn a total of  25.00  from holding Telefonaktiebolaget LM Ericsson or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  TELES Informationstechnologien

Telefonaktiebolaget

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Telefonaktiebolaget is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

TELES Informationstech

Risk-Adjusted Performance

Very Weak

Over the last 90 days TELES Informationstechnologien AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward-looking signals remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Telefonaktiebolaget and TELES Informationstech

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

The idea behind Telefonaktiebolaget LM Ericsson and TELES Informationstechnologien AG 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.