Correlation Between Telefonaktiebolaget and Knightscope

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

Diversification Opportunities for Telefonaktiebolaget and Knightscope

0.6

Correlation Coefficient

Telefonaktiebolaget  Knightscope

Poor diversification

The 3 months correlation between Telefonaktiebolaget and Knightscope is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope 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 Knightscope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knightscope has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Knightscope go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Knightscope

Given the investment horizon of 90 days Telefonaktiebolaget LM Ericsson is expected to generate 0.22 times more return on investment than Knightscope. However, Telefonaktiebolaget LM Ericsson is 4.63 times less risky than Knightscope. It trades about 0.05 of its potential returns per unit of risk. Knightscope is currently generating about 0.0 per unit of risk. If you would invest  556.00  in Telefonaktiebolaget LM Ericsson on September 30, 2024 and sell it today you would earn a total of  254.00  from holding Telefonaktiebolaget LM Ericsson or generate 45.68% return on investment over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  Knightscope

Telefonaktiebolaget

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating forward indicators, Telefonaktiebolaget may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Knightscope

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knightscope are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Knightscope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonaktiebolaget and Knightscope

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

The idea behind Telefonaktiebolaget LM Ericsson and Knightscope 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.