Correlation Between Flowers Foods and Telefonaktiebolaget

Can any of the company-specific risk be diversified away by investing in both Flowers Foods and Telefonaktiebolaget 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 Flowers Foods and Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Flowers Foods and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Flowers Foods and Telefonaktiebolaget 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 Flowers Foods with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flowers Foods and Telefonaktiebolaget.

Diversification Opportunities for Flowers Foods and Telefonaktiebolaget

-0.53

Correlation Coefficient

Flowers Foods  Telefonaktiebolaget

Excellent diversification

The 3 months correlation between Flowers and Telefonaktiebolaget is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Flowers Foods and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Flowers Foods 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 Flowers Foods are associated (or correlated) with Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Flowers Foods i.e., Flowers Foods and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Flowers Foods and Telefonaktiebolaget

Assuming the 90 days horizon Flowers Foods is expected to under-perform the Telefonaktiebolaget. In addition to that, Flowers Foods is 1.44 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.09 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.11 per unit of volatility. If you would invest  775.00  in Telefonaktiebolaget LM Ericsson on October 25, 2024 and sell it today you would earn a total of  50.00  from holding Telefonaktiebolaget LM Ericsson or generate 6.45% return on investment over 90 days.

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

Flowers Foods  vs.  Telefonaktiebolaget LM Ericsso

Flowers Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flowers Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telefonaktiebolaget

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental indicators, Telefonaktiebolaget may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Flowers Foods and Telefonaktiebolaget

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

The idea behind Flowers Foods and Telefonaktiebolaget LM Ericsson 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.