Correlation Between Telefonaktiebolaget and Cell Impact

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

Diversification Opportunities for Telefonaktiebolaget and Cell Impact

0.32

Correlation Coefficient

Telefonaktiebolaget  Cell Impact

Weak diversification

The 3 months correlation between Telefonaktiebolaget and Cell is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Cell Impact AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cell Impact 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 Cell Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cell Impact AB has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Cell Impact go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Cell Impact

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.35 times more return on investment than Cell Impact. However, Telefonaktiebolaget LM Ericsson is 2.87 times less risky than Cell Impact. It trades about -0.01 of its potential returns per unit of risk. Cell Impact AB is currently generating about -0.13 per unit of risk. If you would invest  9,002  in Telefonaktiebolaget LM Ericsson on December 1, 2024 and sell it today you would lose (186.00) from holding Telefonaktiebolaget LM Ericsson or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  Cell Impact 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Cell Impact AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cell Impact AB 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 Cell Impact

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

The idea behind Telefonaktiebolaget LM Ericsson and Cell Impact 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 CEOs Directory module to screen CEOs from public companies around the world.