Correlation Between Telefonaktiebolaget and Enad Global

Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Enad Global 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 Enad Global 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 Enad Global 7, you can compare the effects of market volatilities on Telefonaktiebolaget and Enad Global 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 Enad Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Enad Global.

Diversification Opportunities for Telefonaktiebolaget and Enad Global

0.59

Correlation Coefficient

Telefonaktiebolaget  Enad Global

Very weak diversification

The 3 months correlation between Telefonaktiebolaget and Enad is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Enad Global 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enad Global 7 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 Enad Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enad Global 7 has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Enad Global go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Enad Global

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.89 times more return on investment than Enad Global. However, Telefonaktiebolaget LM Ericsson is 1.12 times less risky than Enad Global. It trades about -0.01 of its potential returns per unit of risk. Enad Global 7 is currently generating about -0.15 per unit of risk. If you would invest  9,000  in Telefonaktiebolaget LM Ericsson on December 1, 2024 and sell it today you would lose (200.00) from holding Telefonaktiebolaget LM Ericsson or give up 2.22% of portfolio value over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  Enad Global 7

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

Enad Global 7

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enad Global 7 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Telefonaktiebolaget and Enad Global

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

The idea behind Telefonaktiebolaget LM Ericsson and Enad Global 7 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.