Correlation Between Telefonaktiebolaget and SRV Group
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and SRV Group 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 SRV Group 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 SRV Group plc, you can compare the effects of market volatilities on Telefonaktiebolaget and SRV Group 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 SRV Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and SRV Group.
Diversification Opportunities for Telefonaktiebolaget and SRV Group
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Telefonaktiebolaget and SRV is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and SRV Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SRV Group plc 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 SRV Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SRV Group plc has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and SRV Group go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and SRV Group
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 1.42 times more return on investment than SRV Group. However, Telefonaktiebolaget is 1.42 times more volatile than SRV Group plc. It trades about -0.13 of its potential returns per unit of risk. SRV Group plc is currently generating about -0.24 per unit of risk. If you would invest 831.00 in Telefonaktiebolaget LM Ericsson on November 18, 2024 and sell it today you would lose (73.00) from holding Telefonaktiebolaget LM Ericsson or give up 8.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. SRV Group plc
Performance |
| Timeline |
| Telefonaktiebolaget |
| SRV Group plc |
Telefonaktiebolaget and SRV Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and SRV Group
The main advantage of trading using opposite Telefonaktiebolaget and SRV Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, SRV Group 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 SRV Group will offset losses from the drop in SRV Group's long position.| Telefonaktiebolaget vs. Telia Company AB | Telefonaktiebolaget vs. SSAB AB ser | Telefonaktiebolaget vs. Kesko Oyj | Telefonaktiebolaget vs. Stora Enso Oyj |
| SRV Group vs. Ponsse Oyj 1 | SRV Group vs. Lassila Tikanoja Oyj | SRV Group vs. Tokmanni Group Oyj | SRV Group vs. CapMan Oyj B |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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