Correlation Between Telefonaktiebolaget and Upsales Technology

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

Diversification Opportunities for Telefonaktiebolaget and Upsales Technology

-0.17

Correlation Coefficient

Telefonaktiebolaget  Upsales Technology

Good diversification

The 3 months correlation between Telefonaktiebolaget and Upsales is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Upsales Technology AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upsales Technology 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 Upsales Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upsales Technology has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Upsales Technology go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Upsales Technology

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to under-perform the Upsales Technology. But the stock apears to be less risky and, when comparing its historical volatility, Telefonaktiebolaget LM Ericsson is 1.21 times less risky than Upsales Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Upsales Technology AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,160  in Upsales Technology AB on December 1, 2024 and sell it today you would earn a total of  340.00  from holding Upsales Technology AB or generate 10.76% return on investment over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  Upsales Technology 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 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.

Upsales Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Upsales Technology AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Upsales Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonaktiebolaget and Upsales Technology

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

The idea behind Telefonaktiebolaget LM Ericsson and Upsales Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.