Correlation Between H M and Telia Company

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

By analyzing existing cross correlation between H M Hennes and Telia Company AB, you can compare the effects of market volatilities on H M and Telia Company 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 H M with a short position of Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and Telia Company.

Diversification Opportunities for H M and Telia Company

-0.68

Correlation Coefficient

H M  Telia Company

Excellent diversification

The 3 months correlation between HM-B and Telia is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company and H M 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 H M Hennes are associated (or correlated) with Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of H M i.e., H M and Telia Company go up and down completely randomly.

Pair Corralation between H M and Telia Company

Assuming the 90 days trading horizon H M Hennes is expected to under-perform the Telia Company. In addition to that, H M is 1.55 times more volatile than Telia Company AB. It trades about -0.11 of its total potential returns per unit of risk. Telia Company AB is currently generating about 0.27 per unit of volatility. If you would invest  3,021  in Telia Company AB on December 30, 2024 and sell it today you would earn a total of  583.00  from holding Telia Company AB or generate 19.3% return on investment over 90 days.

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

H M Hennes  vs.  Telia Company AB

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Telia Company

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telia Company AB are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Telia Company unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with H M and Telia Company

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

The idea behind H M Hennes and Telia Company 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.