Correlation Between ZTE and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both ZTE and Telefonaktiebolaget 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 ZTE and Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ZTE Corporation and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on ZTE and Telefonaktiebolaget 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 ZTE with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZTE and Telefonaktiebolaget.
Diversification Opportunities for ZTE and Telefonaktiebolaget
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ZTE and Telefonaktiebolaget is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ZTE Corp. and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and ZTE 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 ZTE Corporation are associated (or correlated) with Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of ZTE i.e., ZTE and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between ZTE and Telefonaktiebolaget
Assuming the 90 days horizon ZTE Corporation is expected to under-perform the Telefonaktiebolaget. In addition to that, ZTE is 4.25 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.02 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about -0.06 per unit of volatility. If you would invest 775.00 in Telefonaktiebolaget LM Ericsson on August 28, 2024 and sell it today you would lose (10.00) from holding Telefonaktiebolaget LM Ericsson or give up 1.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ZTE Corp. vs. Telefonaktiebolaget LM Ericsso
Performance |
| Timeline |
| ZTE Corporation |
| Telefonaktiebolaget |
ZTE and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ZTE and Telefonaktiebolaget
The main advantage of trading using opposite ZTE and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTE position performs unexpectedly, Telefonaktiebolaget 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 Telefonaktiebolaget will offset losses from the drop in Telefonaktiebolaget's long position.| ZTE vs. United Insurance Holdings | ZTE vs. Goosehead Insurance | ZTE vs. Scandinavian Tobacco Group | ZTE vs. British American Tobacco |
| Telefonaktiebolaget vs. Cisco Systems | Telefonaktiebolaget vs. Telefonaktiebolaget LM Ericsson | Telefonaktiebolaget vs. Superior Plus Corp | Telefonaktiebolaget vs. NMI Holdings |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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