Correlation Between Telefonaktiebolaget and Fondia Oyj
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Fondia Oyj 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 Fondia Oyj 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 Fondia Oyj, you can compare the effects of market volatilities on Telefonaktiebolaget and Fondia Oyj 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 Fondia Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Fondia Oyj.
Diversification Opportunities for Telefonaktiebolaget and Fondia Oyj
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Telefonaktiebolaget and Fondia is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Fondia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fondia Oyj 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 Fondia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fondia Oyj has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Fondia Oyj go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Fondia Oyj
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.33 times more return on investment than Fondia Oyj. However, Telefonaktiebolaget LM Ericsson is 3.07 times less risky than Fondia Oyj. It trades about 0.05 of its potential returns per unit of risk. Fondia Oyj is currently generating about -0.24 per unit of risk. If you would invest 772.00 in Telefonaktiebolaget LM Ericsson on September 1, 2024 and sell it today you would earn a total of 8.00 from holding Telefonaktiebolaget LM Ericsson or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Fondia Oyj
Performance |
| Timeline |
| Telefonaktiebolaget |
| Fondia Oyj |
Telefonaktiebolaget and Fondia Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Fondia Oyj
The main advantage of trading using opposite Telefonaktiebolaget and Fondia Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Fondia Oyj 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 Fondia Oyj will offset losses from the drop in Fondia Oyj's long position.| Telefonaktiebolaget vs. Telia Company AB | Telefonaktiebolaget vs. SSAB AB ser | Telefonaktiebolaget vs. Kesko Oyj | Telefonaktiebolaget vs. Stora Enso Oyj |
| Fondia Oyj vs. Admicom Oyj | Fondia Oyj vs. Talenom Oyj | Fondia Oyj vs. Vincit Group Oyj | Fondia Oyj vs. Harvia Oyj |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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