Correlation Between Telefonaktiebolaget and Sivers IMA

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

Diversification Opportunities for Telefonaktiebolaget and Sivers IMA

-0.74

Correlation Coefficient

Telefonaktiebolaget  Sivers IMA

Pay attention - limited upside

The 3 months correlation between Telefonaktiebolaget and Sivers is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Sivers IMA Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sivers IMA 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 Sivers IMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sivers IMA Holding has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Sivers IMA go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Sivers IMA

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.22 times more return on investment than Sivers IMA. However, Telefonaktiebolaget LM Ericsson is 4.45 times less risky than Sivers IMA. It trades about 0.17 of its potential returns per unit of risk. Sivers IMA Holding is currently generating about -0.13 per unit of risk. If you would invest  7,486  in Telefonaktiebolaget LM Ericsson on September 2, 2024 and sell it today you would earn a total of  1,382  from holding Telefonaktiebolaget LM Ericsson or generate 18.46% return on investment over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  Sivers IMA 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.

Sivers IMA Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sivers IMA Holding 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Telefonaktiebolaget and Sivers IMA

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

The idea behind Telefonaktiebolaget LM Ericsson and Sivers IMA 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.