Correlation Between Proact IT and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both Proact IT 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 Proact IT and Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proact IT Group and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Proact IT 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 Proact IT with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proact IT and Telefonaktiebolaget.
Diversification Opportunities for Proact IT and Telefonaktiebolaget
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Proact and Telefonaktiebolaget is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Proact IT Group and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Proact IT 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 Proact IT Group 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 Proact IT i.e., Proact IT and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between Proact IT and Telefonaktiebolaget
Assuming the 90 days trading horizon Proact IT Group is expected to under-perform the Telefonaktiebolaget. In addition to that, Proact IT is 1.77 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.23 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about -0.07 per unit of volatility. If you would invest 9,100 in Telefonaktiebolaget LM Ericsson on August 29, 2024 and sell it today you would lose (110.00) from holding Telefonaktiebolaget LM Ericsson or give up 1.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proact IT Group vs. Telefonaktiebolaget LM Ericsso
Performance |
| Timeline |
| Proact IT Group |
| Telefonaktiebolaget |
Proact IT and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proact IT and Telefonaktiebolaget
The main advantage of trading using opposite Proact IT and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proact IT 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.The idea behind Proact IT Group and Telefonaktiebolaget LM Ericsson pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Telefonaktiebolaget vs. New Wave Group | Telefonaktiebolaget vs. Cantargia AB | Telefonaktiebolaget vs. Enea AB | Telefonaktiebolaget vs. Proact IT Group |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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