Correlation Between Telefonaktiebolaget and NIBE Industrier
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and NIBE Industrier 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 NIBE Industrier 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 NIBE Industrier AB, you can compare the effects of market volatilities on Telefonaktiebolaget and NIBE Industrier 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 NIBE Industrier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and NIBE Industrier.
Diversification Opportunities for Telefonaktiebolaget and NIBE Industrier
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telefonaktiebolaget and NIBE is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB 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 NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and NIBE Industrier go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and NIBE Industrier
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.68 times more return on investment than NIBE Industrier. However, Telefonaktiebolaget LM Ericsson is 1.48 times less risky than NIBE Industrier. It trades about 0.06 of its potential returns per unit of risk. NIBE Industrier AB is currently generating about -0.06 per unit of risk. If you would invest 6,366 in Telefonaktiebolaget LM Ericsson on October 25, 2024 and sell it today you would earn a total of 3,384 from holding Telefonaktiebolaget LM Ericsson or generate 53.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. NIBE Industrier AB
Performance |
| Timeline |
| Telefonaktiebolaget |
| NIBE Industrier AB |
Telefonaktiebolaget and NIBE Industrier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and NIBE Industrier
The main advantage of trading using opposite Telefonaktiebolaget and NIBE Industrier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, NIBE Industrier 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 NIBE Industrier will offset losses from the drop in NIBE Industrier's long position.| Telefonaktiebolaget vs. Telefonaktiebolaget LM Ericsson | Telefonaktiebolaget vs. AB Volvo | Telefonaktiebolaget vs. Investor AB ser | Telefonaktiebolaget vs. Industrivarden AB ser |
| NIBE Industrier vs. Hexagon AB | NIBE Industrier vs. Investor AB ser | NIBE Industrier vs. Investment AB Latour | NIBE Industrier vs. ASSA ABLOY 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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