Correlation Between Telefonaktiebolaget and Lucara Diamond
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Lucara Diamond 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 Lucara Diamond 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 Lucara Diamond Corp, you can compare the effects of market volatilities on Telefonaktiebolaget and Lucara Diamond 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 Lucara Diamond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Lucara Diamond.
Diversification Opportunities for Telefonaktiebolaget and Lucara Diamond
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telefonaktiebolaget and Lucara is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Lucara Diamond Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lucara Diamond Corp 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 Lucara Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lucara Diamond Corp has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Lucara Diamond go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Lucara Diamond
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.46 times more return on investment than Lucara Diamond. However, Telefonaktiebolaget LM Ericsson is 2.18 times less risky than Lucara Diamond. It trades about 0.2 of its potential returns per unit of risk. Lucara Diamond Corp is currently generating about -0.2 per unit of risk. If you would invest 8,890 in Telefonaktiebolaget LM Ericsson on October 26, 2024 and sell it today you would earn a total of 860.00 from holding Telefonaktiebolaget LM Ericsson or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Lucara Diamond Corp
Performance |
| Timeline |
| Telefonaktiebolaget |
| Lucara Diamond Corp |
Telefonaktiebolaget and Lucara Diamond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Lucara Diamond
The main advantage of trading using opposite Telefonaktiebolaget and Lucara Diamond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Lucara Diamond 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 Lucara Diamond will offset losses from the drop in Lucara Diamond's long position.| Telefonaktiebolaget vs. Telefonaktiebolaget LM Ericsson | Telefonaktiebolaget vs. AB Volvo | Telefonaktiebolaget vs. Investor AB ser | Telefonaktiebolaget vs. Industrivarden AB ser |
| Lucara Diamond vs. Africa Oil Corp | Lucara Diamond vs. Lundin Gold | Lucara Diamond vs. Lundin Mining | Lucara Diamond vs. Inwido AB |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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