Correlation Between Telefonaktiebolaget and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Stora Enso 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 Stora Enso 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 Stora Enso Oyj, you can compare the effects of market volatilities on Telefonaktiebolaget and Stora Enso 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 Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Stora Enso.
Diversification Opportunities for Telefonaktiebolaget and Stora Enso
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Telefonaktiebolaget and Stora is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso 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 Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Stora Enso go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Stora Enso
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.95 times more return on investment than Stora Enso. However, Telefonaktiebolaget LM Ericsson is 1.05 times less risky than Stora Enso. It trades about -0.05 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.5 per unit of risk. If you would invest 784.00 in Telefonaktiebolaget LM Ericsson on August 27, 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Stora Enso Oyj
Performance |
| Timeline |
| Telefonaktiebolaget |
| Stora Enso Oyj |
Telefonaktiebolaget and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Stora Enso
The main advantage of trading using opposite Telefonaktiebolaget and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Stora Enso 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 Stora Enso will offset losses from the drop in Stora Enso's long position.| Telefonaktiebolaget vs. Telia Company AB | Telefonaktiebolaget vs. SSAB AB ser | Telefonaktiebolaget vs. Kesko Oyj | Telefonaktiebolaget vs. Stora Enso 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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