Correlation Between Telefonaktiebolaget and Cinis Fertilizer

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

Diversification Opportunities for Telefonaktiebolaget and Cinis Fertilizer

0.44

Correlation Coefficient

Telefonaktiebolaget  Cinis Fertilizer

Very weak diversification

The 3 months correlation between Telefonaktiebolaget and Cinis is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Cinis Fertilizer AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cinis Fertilizer 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 Cinis Fertilizer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cinis Fertilizer has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Cinis Fertilizer go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Cinis Fertilizer

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.16 times more return on investment than Cinis Fertilizer. However, Telefonaktiebolaget LM Ericsson is 6.29 times less risky than Cinis Fertilizer. It trades about -0.01 of its potential returns per unit of risk. Cinis Fertilizer AB is currently generating about -0.1 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	Weak
Accuracy	98.33%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  Cinis Fertilizer 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.

Cinis Fertilizer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cinis Fertilizer 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 Cinis Fertilizer

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

The idea behind Telefonaktiebolaget LM Ericsson and Cinis Fertilizer 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.