Correlation Between Sandvik AB and Telefonaktiebolaget
Can any of the company-specific risk be diversified away by investing in both Sandvik AB 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 Sandvik AB and Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Sandvik AB 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 Sandvik AB with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Telefonaktiebolaget.
Diversification Opportunities for Sandvik AB and Telefonaktiebolaget
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sandvik and Telefonaktiebolaget is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Sandvik AB 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 Sandvik AB 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 Sandvik AB i.e., Sandvik AB and Telefonaktiebolaget go up and down completely randomly.
Pair Corralation between Sandvik AB and Telefonaktiebolaget
Assuming the 90 days trading horizon Sandvik AB is expected to under-perform the Telefonaktiebolaget. In addition to that, Sandvik AB is 1.88 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.21 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about -0.12 per unit of volatility. 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. Telefonaktiebolaget LM Ericsso
Performance |
| Timeline |
| Sandvik AB |
| Telefonaktiebolaget |
Sandvik AB and Telefonaktiebolaget Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Telefonaktiebolaget
The main advantage of trading using opposite Sandvik AB and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB 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.| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden AB |
| Telefonaktiebolaget vs. H M Hennes | Telefonaktiebolaget vs. Swedbank AB | Telefonaktiebolaget vs. Investor AB ser | Telefonaktiebolaget vs. Sandvik 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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