Correlation Between Telia Company and Honkarakenne Oyj

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

Diversification Opportunities for Telia Company and Honkarakenne Oyj

0.57

Correlation Coefficient

Telia Company  Honkarakenne Oyj

Very weak diversification

The 3 months correlation between Telia and Honkarakenne is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company AB and Honkarakenne Oyj B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honkarakenne Oyj B 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 Honkarakenne Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honkarakenne Oyj B has no effect on the direction of Telia Company i.e., Telia Company and Honkarakenne Oyj go up and down completely randomly.

Pair Corralation between Telia Company and Honkarakenne Oyj

Assuming the 90 days trading horizon Telia Company is expected to generate 1.21 times less return on investment than Honkarakenne Oyj. But when comparing it to its historical volatility, Telia Company AB is 2.27 times less risky than Honkarakenne Oyj. It trades about 0.26 of its potential returns per unit of risk. Honkarakenne Oyj B is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  250.00  in Honkarakenne Oyj B on October 21, 2024 and sell it today you would earn a total of  14.00  from holding Honkarakenne Oyj B or generate 5.6% return on investment over 90 days.

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

Telia Company AB  vs.  Honkarakenne Oyj B

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.

Honkarakenne Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honkarakenne Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Telia Company and Honkarakenne Oyj

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

The idea behind Telia Company AB and Honkarakenne Oyj B 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..