Correlation Between TELE2 AB and Intouch Holdings

Can any of the company-specific risk be diversified away by investing in both TELE2 AB and Intouch Holdings 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 TELE2 AB and Intouch Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TELE2 AB UNSPADR12 and Intouch Holdings Public, you can compare the effects of market volatilities on TELE2 AB and Intouch Holdings 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 TELE2 AB with a short position of Intouch Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of TELE2 AB and Intouch Holdings.

Diversification Opportunities for TELE2 AB and Intouch Holdings

0.02

Correlation Coefficient

TELE2 AB  Intouch Holdings

Significant diversification

The 3 months correlation between TELE2 and Intouch is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding TELE2 AB UNSPADR12 and Intouch Holdings Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intouch Holdings Public and TELE2 AB 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 TELE2 AB UNSPADR12 are associated (or correlated) with Intouch Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intouch Holdings Public has no effect on the direction of TELE2 AB i.e., TELE2 AB and Intouch Holdings go up and down completely randomly.

Pair Corralation between TELE2 AB and Intouch Holdings

Assuming the 90 days horizon TELE2 AB UNSPADR12 is expected to generate 1.04 times more return on investment than Intouch Holdings. However, TELE2 AB is 1.04 times more volatile than Intouch Holdings Public. It trades about 0.35 of its potential returns per unit of risk. Intouch Holdings Public is currently generating about -0.26 per unit of risk. If you would invest  476.00  in TELE2 AB UNSPADR12 on November 28, 2024 and sell it today you would earn a total of  84.00  from holding TELE2 AB UNSPADR12 or generate 17.65% return on investment over 90 days.

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

TELE2 AB UNSPADR12  vs.  Intouch Holdings Public

TELE2 AB UNSPADR12

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TELE2 AB UNSPADR12 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TELE2 AB reported solid returns over the last few months and may actually be approaching a breakup point.

Intouch Holdings Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intouch Holdings Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Intouch Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TELE2 AB and Intouch Holdings

The main advantage of trading using opposite TELE2 AB and Intouch Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TELE2 AB position performs unexpectedly, Intouch Holdings 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 Intouch Holdings will offset losses from the drop in Intouch Holdings' long position.

The idea behind TELE2 AB UNSPADR12 and Intouch Holdings Public 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.