Correlation Between Telia Company and Fodelia

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

Diversification Opportunities for Telia Company and Fodelia

-0.54

Correlation Coefficient

Telia Company  Fodelia

Excellent diversification

The 3 months correlation between Telia and Fodelia is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company AB and Fodelia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fodelia 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 Fodelia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fodelia has no effect on the direction of Telia Company i.e., Telia Company and Fodelia go up and down completely randomly.

Pair Corralation between Telia Company and Fodelia

Assuming the 90 days trading horizon Telia Company AB is expected to under-perform the Fodelia. But the stock apears to be less risky and, when comparing its historical volatility, Telia Company AB is 1.73 times less risky than Fodelia. The stock trades about -0.06 of its potential returns per unit of risk. The Fodelia is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  618.00  in Fodelia on October 5, 2024 and sell it today you would lose (6.00) from holding Fodelia or give up 0.97% of portfolio value over 90 days.

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

Telia Company AB  vs.  Fodelia

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fodelia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fodelia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, Fodelia may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Telia Company and Fodelia

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

The idea behind Telia Company AB and Fodelia 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.