Correlation Between Telefonaktiebolaget and Svenska Handelsbanken
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Svenska Handelsbanken 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 Svenska Handelsbanken 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 Svenska Handelsbanken AB, you can compare the effects of market volatilities on Telefonaktiebolaget and Svenska Handelsbanken 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 Svenska Handelsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Svenska Handelsbanken.
Diversification Opportunities for Telefonaktiebolaget and Svenska Handelsbanken
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and Svenska is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken 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 Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Svenska Handelsbanken go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Svenska Handelsbanken
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to under-perform the Svenska Handelsbanken. But the stock apears to be less risky and, when comparing its historical volatility, Telefonaktiebolaget LM Ericsson is 1.12 times less risky than Svenska Handelsbanken. The stock trades about -0.15 of its potential returns per unit of risk. The Svenska Handelsbanken AB is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 11,240 in Svenska Handelsbanken AB on August 27, 2024 and sell it today you would lose (160.00) from holding Svenska Handelsbanken AB or give up 1.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Svenska Handelsbanken AB
Performance |
| Timeline |
| Telefonaktiebolaget |
| Svenska Handelsbanken |
Telefonaktiebolaget and Svenska Handelsbanken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Svenska Handelsbanken
The main advantage of trading using opposite Telefonaktiebolaget and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Svenska Handelsbanken 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 Svenska Handelsbanken will offset losses from the drop in Svenska Handelsbanken's long position.| Telefonaktiebolaget vs. Telefonaktiebolaget LM Ericsson | Telefonaktiebolaget vs. AB Volvo | Telefonaktiebolaget vs. Investor AB ser | Telefonaktiebolaget vs. Industrivarden AB ser |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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