Correlation Between Telefonaktiebolaget and Klaria Pharma

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

Diversification Opportunities for Telefonaktiebolaget and Klaria Pharma

-0.45

Correlation Coefficient

Telefonaktiebolaget  Klaria Pharma

Very good diversification

The 3 months correlation between Telefonaktiebolaget and Klaria is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Klaria Pharma Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Klaria Pharma Holding 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 Klaria Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Klaria Pharma Holding has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Klaria Pharma go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Klaria Pharma

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.18 times more return on investment than Klaria Pharma. However, Telefonaktiebolaget LM Ericsson is 5.53 times less risky than Klaria Pharma. It trades about 0.18 of its potential returns per unit of risk. Klaria Pharma Holding is currently generating about 0.03 per unit of risk. If you would invest  7,545  in Telefonaktiebolaget LM Ericsson on September 3, 2024 and sell it today you would earn a total of  1,455  from holding Telefonaktiebolaget LM Ericsson or generate 19.28% return on investment over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  Klaria Pharma Holding

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 weak forward indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Klaria Pharma Holding

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Klaria Pharma Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Klaria Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonaktiebolaget and Klaria Pharma

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

The idea behind Telefonaktiebolaget LM Ericsson and Klaria Pharma Holding 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.