Correlation Between Century Therapeutics and Telefonaktiebolaget

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

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

Diversification Opportunities for Century Therapeutics and Telefonaktiebolaget

-0.45

Correlation Coefficient

Century Therapeutics  Telefonaktiebolaget

Very good diversification

The 3 months correlation between Century and Telefonaktiebolaget is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Century Therapeutics and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Century Therapeutics 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 Century Therapeutics 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 Century Therapeutics i.e., Century Therapeutics and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Century Therapeutics and Telefonaktiebolaget

Given the investment horizon of 90 days Century Therapeutics is expected to under-perform the Telefonaktiebolaget. In addition to that, Century Therapeutics is 2.56 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.05 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  724.00  in Telefonaktiebolaget LM Ericsson on September 14, 2024 and sell it today you would earn a total of  99.00  from holding Telefonaktiebolaget LM Ericsson or generate 13.67% return on investment over 90 days.

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

Century Therapeutics  vs.  Telefonaktiebolaget LM Ericsso

Century Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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. In spite of rather conflicting forward indicators, Telefonaktiebolaget exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Therapeutics and Telefonaktiebolaget

The main advantage of trading using opposite Century Therapeutics and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Therapeutics 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 Century Therapeutics 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.