Correlation Between Waystream Holding and Telefonaktiebolaget

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

By analyzing existing cross correlation between Waystream Holding AB and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Waystream Holding and Telefonaktiebolaget 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 Waystream Holding with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waystream Holding and Telefonaktiebolaget.

Diversification Opportunities for Waystream Holding and Telefonaktiebolaget

-0.34

Correlation Coefficient

Waystream Holding  Telefonaktiebolaget

Very good diversification

The 3 months correlation between Waystream and Telefonaktiebolaget is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Waystream Holding AB and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Waystream Holding 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 Waystream Holding AB are associated (or correlated) with Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Waystream Holding i.e., Waystream Holding and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Waystream Holding and Telefonaktiebolaget

Assuming the 90 days trading horizon Waystream Holding AB is expected to generate 3.79 times more return on investment than Telefonaktiebolaget. However, Waystream Holding is 3.79 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.11 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.02 per unit of risk. If you would invest  1,560  in Waystream Holding AB on October 5, 2024 and sell it today you would earn a total of  80.00  from holding Waystream Holding AB or generate 5.13% return on investment over 90 days.

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

Waystream Holding AB  vs.  Telefonaktiebolaget LM Ericsso

Waystream Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Telefonaktiebolaget

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waystream Holding and Telefonaktiebolaget

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

The idea behind Waystream Holding AB and Telefonaktiebolaget LM Ericsson 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.