Correlation Between Tele2 AB and AAK AB

Can any of the company-specific risk be diversified away by investing in both Tele2 AB and AAK 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 AAK 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 AAK AB, you can compare the effects of market volatilities on Tele2 AB and AAK 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 AAK AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and AAK AB.

Diversification Opportunities for Tele2 AB and AAK AB

-0.08

Correlation Coefficient

Tele2 AB  AAK AB

Good diversification

The 3 months correlation between Tele2 and AAK is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and AAK AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAK 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 AAK AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAK AB has no effect on the direction of Tele2 AB i.e., Tele2 AB and AAK AB go up and down completely randomly.

Pair Corralation between Tele2 AB and AAK AB

Assuming the 90 days trading horizon Tele2 AB is expected to generate 3.09 times less return on investment than AAK AB. But when comparing it to its historical volatility, Tele2 AB is 1.46 times less risky than AAK AB. It trades about 0.09 of its potential returns per unit of risk. AAK AB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  28,880  in AAK AB on September 12, 2024 and sell it today you would earn a total of  1,520  from holding AAK AB or generate 5.26% 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.  AAK AB

Tele2 AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Tele2 AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

AAK AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tele2 AB and AAK AB

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

The idea behind Tele2 AB and AAK 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.