Correlation Between Telefonaktiebolaget and CME
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and CME 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 Telefonaktiebolaget and CME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonaktiebolaget LM Ericsson and CME Group, you can compare the effects of market volatilities on Telefonaktiebolaget and CME 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 Telefonaktiebolaget with a short position of CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and CME.
Diversification Opportunities for Telefonaktiebolaget and CME
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and CME is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson are associated (or correlated) with CME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CME Group has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and CME go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and CME
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 1.75 times more return on investment than CME. However, Telefonaktiebolaget is 1.75 times more volatile than CME Group. It trades about 0.13 of its potential returns per unit of risk. CME Group is currently generating about 0.09 per unit of risk. If you would invest 1,339 in Telefonaktiebolaget LM Ericsson on September 2, 2024 and sell it today you would earn a total of 1,061 from holding Telefonaktiebolaget LM Ericsson or generate 79.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 92.74% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. CME Group
Performance |
| Timeline |
| Telefonaktiebolaget |
| CME Group |
Telefonaktiebolaget and CME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and CME
The main advantage of trading using opposite Telefonaktiebolaget and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, CME 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 CME will offset losses from the drop in CME's long position.| Telefonaktiebolaget vs. Apartment Investment and | Telefonaktiebolaget vs. Planet Fitness | Telefonaktiebolaget vs. CM Hospitalar SA | Telefonaktiebolaget vs. METISA Metalrgica Timboense |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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