Correlation Between Tele2 AB and Ratos AB

Can any of the company-specific risk be diversified away by investing in both Tele2 AB and Ratos AB 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 Ratos AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tele2 AB and Ratos AB, you can compare the effects of market volatilities on Tele2 AB and Ratos AB 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 Ratos AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Ratos AB.

Diversification Opportunities for Tele2 AB and Ratos AB

-0.21

Correlation Coefficient

Tele2 AB  Ratos AB

Very good diversification

The 3 months correlation between Tele2 and Ratos is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Ratos AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratos AB 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 are associated (or correlated) with Ratos AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratos AB has no effect on the direction of Tele2 AB i.e., Tele2 AB and Ratos AB go up and down completely randomly.

Pair Corralation between Tele2 AB and Ratos AB

Assuming the 90 days trading horizon Tele2 AB is expected to generate 2.8 times less return on investment than Ratos AB. But when comparing it to its historical volatility, Tele2 AB is 1.78 times less risky than Ratos AB. It trades about 0.01 of its potential returns per unit of risk. Ratos AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,440  in Ratos AB on September 4, 2024 and sell it today you would earn a total of  40.00  from holding Ratos AB or generate 1.16% return on investment over 90 days.

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

Tele2 AB  vs.  Ratos AB

Tele2 AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Tele2 AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Tele2 AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ratos AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ratos AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tele2 AB and Ratos AB

The main advantage of trading using opposite Tele2 AB and Ratos AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, Ratos AB 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 Ratos AB will offset losses from the drop in Ratos AB's long position.

The idea behind Tele2 AB and Ratos 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.