Correlation Between Telia Company and Aspo Oyj

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

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

Diversification Opportunities for Telia Company and Aspo Oyj

0.68

Correlation Coefficient

Telia Company  Aspo Oyj

Poor diversification

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

Pair Corralation between Telia Company and Aspo Oyj

Assuming the 90 days trading horizon Telia Company AB is expected to generate 0.81 times more return on investment than Aspo Oyj. However, Telia Company AB is 1.24 times less risky than Aspo Oyj. It trades about 0.33 of its potential returns per unit of risk. Aspo Oyj is currently generating about 0.13 per unit of risk. If you would invest  264.00  in Telia Company AB on December 22, 2024 and sell it today you would earn a total of  62.00  from holding Telia Company AB or generate 23.48% return on investment over 90 days.

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

Telia Company AB  vs.  Aspo Oyj

Telia Company

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Telia Company AB are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Telia Company sustained solid returns over the last few months and may actually be approaching a breakup point.

Aspo Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aspo Oyj are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Aspo Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Telia Company and Aspo Oyj

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

The idea behind Telia Company AB and Aspo Oyj 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.