Correlation Between Telefonaktiebolaget and Nexstim Oyj
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Nexstim 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 Nexstim 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 Nexstim Oyj, you can compare the effects of market volatilities on Telefonaktiebolaget and Nexstim 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 Nexstim Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Nexstim Oyj.
Diversification Opportunities for Telefonaktiebolaget and Nexstim Oyj
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Telefonaktiebolaget and Nexstim is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Nexstim Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstim 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 Nexstim Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstim Oyj has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Nexstim Oyj go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Nexstim Oyj
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.59 times more return on investment than Nexstim Oyj. However, Telefonaktiebolaget LM Ericsson is 1.68 times less risky than Nexstim Oyj. It trades about -0.05 of its potential returns per unit of risk. Nexstim Oyj is currently generating about -0.06 per unit of risk. If you would invest 784.00 in Telefonaktiebolaget LM Ericsson on August 26, 2024 and sell it today you would lose (11.00) from holding Telefonaktiebolaget LM Ericsson or give up 1.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Nexstim Oyj
Performance |
| Timeline |
| Telefonaktiebolaget |
| Nexstim Oyj |
Telefonaktiebolaget and Nexstim Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Nexstim Oyj
The main advantage of trading using opposite Telefonaktiebolaget and Nexstim Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Nexstim 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 Nexstim Oyj will offset losses from the drop in Nexstim Oyj's long position.| Telefonaktiebolaget vs. Telia Company AB | Telefonaktiebolaget vs. SSAB AB ser | Telefonaktiebolaget vs. Stora Enso Oyj | Telefonaktiebolaget vs. Orion Oyj B |
| Nexstim Oyj vs. Telia Company AB | Nexstim Oyj vs. Wartsila Oyj Abp | Nexstim Oyj vs. Tokmanni Group Oyj | Nexstim Oyj vs. YIT 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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