Correlation Between Tele2 AB and Proximus

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

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

Diversification Opportunities for Tele2 AB and Proximus

0.88

Correlation Coefficient

Tele2 AB  Proximus

Very poor diversification

The 3 months correlation between Tele2 and Proximus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Proximus NV ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proximus NV ADR 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 Proximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proximus NV ADR has no effect on the direction of Tele2 AB i.e., Tele2 AB and Proximus go up and down completely randomly.

Pair Corralation between Tele2 AB and Proximus

Assuming the 90 days horizon Tele2 AB is expected to generate 1.41 times less return on investment than Proximus. But when comparing it to its historical volatility, Tele2 AB is 1.76 times less risky than Proximus. It trades about 0.19 of its potential returns per unit of risk. Proximus NV ADR is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  103.00  in Proximus NV ADR on December 30, 2024 and sell it today you would earn a total of  40.00  from holding Proximus NV ADR or generate 38.83% return on investment over 90 days.

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

Tele2 AB  vs.  Proximus NV ADR

Tele2 AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tele2 AB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tele2 AB showed solid returns over the last few months and may actually be approaching a breakup point.

Proximus NV ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Proximus NV ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Proximus showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tele2 AB and Proximus

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

The idea behind Tele2 AB and Proximus NV ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.