Correlation Between Telefonaktiebolaget and COMMERCIAL VEHICLE
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE, you can compare the effects of market volatilities on Telefonaktiebolaget and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and COMMERCIAL VEHICLE.
Diversification Opportunities for Telefonaktiebolaget and COMMERCIAL VEHICLE
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Telefonaktiebolaget and COMMERCIAL is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and COMMERCIAL VEHICLE go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and COMMERCIAL VEHICLE
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.21 times more return on investment than COMMERCIAL VEHICLE. However, Telefonaktiebolaget LM Ericsson is 4.77 times less risky than COMMERCIAL VEHICLE. It trades about -0.01 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.08 per unit of risk. If you would invest 774.00 in Telefonaktiebolaget LM Ericsson on September 1, 2024 and sell it today you would lose (4.00) from holding Telefonaktiebolaget LM Ericsson or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. COMMERCIAL VEHICLE
Performance |
| Timeline |
| Telefonaktiebolaget |
| COMMERCIAL VEHICLE |
Telefonaktiebolaget and COMMERCIAL VEHICLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and COMMERCIAL VEHICLE
The main advantage of trading using opposite Telefonaktiebolaget and COMMERCIAL VEHICLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE will offset losses from the drop in COMMERCIAL VEHICLE's long position.| Telefonaktiebolaget vs. COMMERCIAL VEHICLE | Telefonaktiebolaget vs. Bausch Health Companies | Telefonaktiebolaget vs. EPSILON HEALTHCARE LTD | Telefonaktiebolaget vs. Natural Health Trends |
| COMMERCIAL VEHICLE vs. SIVERS SEMICONDUCTORS AB | COMMERCIAL VEHICLE vs. Darden Restaurants | COMMERCIAL VEHICLE vs. Reliance Steel Aluminum | COMMERCIAL VEHICLE vs. Q2M Managementberatung AG |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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