Correlation Between Telefonaktiebolaget and Knowles
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Knowles 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 Knowles 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 Knowles, you can compare the effects of market volatilities on Telefonaktiebolaget and Knowles 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 Knowles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Knowles.
Diversification Opportunities for Telefonaktiebolaget and Knowles
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and Knowles is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Knowles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles 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 Knowles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Knowles go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Knowles
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to under-perform the Knowles. But the stock apears to be less risky and, when comparing its historical volatility, Telefonaktiebolaget LM Ericsson is 1.75 times less risky than Knowles. The stock trades about -0.01 of its potential returns per unit of risk. The Knowles is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,590 in Knowles on September 1, 2024 and sell it today you would earn a total of 230.00 from holding Knowles or generate 14.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Knowles
Performance |
| Timeline |
| Telefonaktiebolaget |
| Knowles |
Telefonaktiebolaget and Knowles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Knowles
The main advantage of trading using opposite Telefonaktiebolaget and Knowles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Knowles 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 Knowles will offset losses from the drop in Knowles' long position.| Telefonaktiebolaget vs. WILLIS LEASE FIN | Telefonaktiebolaget vs. LEGACY IRON ORE | Telefonaktiebolaget vs. United Rentals | Telefonaktiebolaget vs. Siamgas And Petrochemicals |
| Knowles vs. ULTRA CLEAN HLDGS | Knowles vs. INTERCONT HOTELS | Knowles vs. Xenia Hotels Resorts | Knowles vs. Luckin Coffee |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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