Correlation Between Telefonaktiebolaget and Nokia
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Nokia 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 Nokia 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 Nokia, you can compare the effects of market volatilities on Telefonaktiebolaget and Nokia 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 Nokia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Nokia.
Diversification Opportunities for Telefonaktiebolaget and Nokia
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and Nokia is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia 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 Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Nokia go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Nokia
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.35 times more return on investment than Nokia. However, Telefonaktiebolaget LM Ericsson is 2.86 times less risky than Nokia. It trades about -0.12 of its potential returns per unit of risk. Nokia is currently generating about -0.32 per unit of risk. If you would invest 9,112 in Telefonaktiebolaget LM Ericsson on August 30, 2024 and sell it today you would lose (184.00) from holding Telefonaktiebolaget LM Ericsson or give up 2.02% 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. Nokia
Performance |
| Timeline |
| Telefonaktiebolaget |
| Nokia |
Telefonaktiebolaget and Nokia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Nokia
The main advantage of trading using opposite Telefonaktiebolaget and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Nokia 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 Nokia will offset losses from the drop in Nokia's long position.| Telefonaktiebolaget vs. H M Hennes | Telefonaktiebolaget vs. Swedbank AB | Telefonaktiebolaget vs. Investor AB ser | Telefonaktiebolaget vs. Sandvik AB |
| Nokia vs. Viavi Solutions | Nokia vs. SatixFy Communications | Nokia vs. Wialan Technologies | Nokia vs. Electronic Systems Technology |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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