Correlation Between GP Investments and Telefonaktiebolaget

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

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

Diversification Opportunities for GP Investments and Telefonaktiebolaget

-0.04

Correlation Coefficient

GP Investments  Telefonaktiebolaget

Good diversification

The 3 months correlation between GPIV33 and Telefonaktiebolaget is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and GP Investments 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 GP Investments 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 GP Investments i.e., GP Investments and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between GP Investments and Telefonaktiebolaget

Assuming the 90 days trading horizon GP Investments is expected to generate 1.09 times less return on investment than Telefonaktiebolaget. In addition to that, GP Investments is 2.1 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.04 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.08 per unit of volatility. If you would invest  2,418  in Telefonaktiebolaget LM Ericsson on October 20, 2024 and sell it today you would earn a total of  171.00  from holding Telefonaktiebolaget LM Ericsson or generate 7.07% return on investment over 90 days.

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

GP Investments  vs.  Telefonaktiebolaget LM Ericsso

GP Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, GP Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Telefonaktiebolaget

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Telefonaktiebolaget may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GP Investments and Telefonaktiebolaget

The main advantage of trading using opposite GP Investments and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GP Investments 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 GP Investments 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.