Correlation Between Tele2 AB and Avanza Bank
Can any of the company-specific risk be diversified away by investing in both Tele2 AB and Avanza Bank 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 Tele2 AB and Avanza Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tele2 AB and Avanza Bank Holding, you can compare the effects of market volatilities on Tele2 AB and Avanza Bank 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 Tele2 AB with a short position of Avanza Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Avanza Bank.
Diversification Opportunities for Tele2 AB and Avanza Bank
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tele2 and Avanza is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Avanza Bank Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avanza Bank Holding and Tele2 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 Tele2 AB are associated (or correlated) with Avanza Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avanza Bank Holding has no effect on the direction of Tele2 AB i.e., Tele2 AB and Avanza Bank go up and down completely randomly.
Pair Corralation between Tele2 AB and Avanza Bank
Assuming the 90 days trading horizon Tele2 AB is expected to generate 2.83 times less return on investment than Avanza Bank. But when comparing it to its historical volatility, Tele2 AB is 1.68 times less risky than Avanza Bank. It trades about 0.14 of its potential returns per unit of risk. Avanza Bank Holding is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 24,210 in Avanza Bank Holding on December 3, 2024 and sell it today you would earn a total of 8,380 from holding Avanza Bank Holding or generate 34.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tele2 AB vs. Avanza Bank Holding
Performance |
| Timeline |
| Tele2 AB |
| Avanza Bank Holding |
Tele2 AB and Avanza Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tele2 AB and Avanza Bank
The main advantage of trading using opposite Tele2 AB and Avanza Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, Avanza Bank 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 Avanza Bank will offset losses from the drop in Avanza Bank's long position.| Tele2 AB vs. Telia Company AB | ||
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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