Correlation Between Telefonaktiebolaget and Svolder AB

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

Diversification Opportunities for Telefonaktiebolaget and Svolder AB

-0.41

Correlation Coefficient

Telefonaktiebolaget  Svolder AB

Very good diversification

The 3 months correlation between Telefonaktiebolaget and Svolder is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Svolder AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svolder AB 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 Svolder AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svolder AB has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Svolder AB go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Svolder AB

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to under-perform the Svolder AB. In addition to that, Telefonaktiebolaget is 1.74 times more volatile than Svolder AB. It trades about -0.06 of its total potential returns per unit of risk. Svolder AB is currently generating about 0.04 per unit of volatility. If you would invest  8,400  in Svolder AB on December 29, 2024 and sell it today you would earn a total of  200.00  from holding Svolder AB or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.02%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  Svolder AB

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 latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Svolder AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Svolder AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Svolder AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Telefonaktiebolaget and Svolder AB

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

The idea behind Telefonaktiebolaget LM Ericsson and Svolder AB 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.