Correlation Between Tele2 AB and MTI Investment
Can any of the company-specific risk be diversified away by investing in both Tele2 AB and MTI Investment 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 MTI Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tele2 AB and MTI Investment SE, you can compare the effects of market volatilities on Tele2 AB and MTI Investment 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 MTI Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and MTI Investment.
Diversification Opportunities for Tele2 AB and MTI Investment
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tele2 and MTI is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and MTI Investment SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTI Investment SE 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 MTI Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTI Investment SE has no effect on the direction of Tele2 AB i.e., Tele2 AB and MTI Investment go up and down completely randomly.
Pair Corralation between Tele2 AB and MTI Investment
Assuming the 90 days trading horizon Tele2 AB is expected to generate 3.84 times less return on investment than MTI Investment. But when comparing it to its historical volatility, Tele2 AB is 4.21 times less risky than MTI Investment. It trades about 0.4 of its potential returns per unit of risk. MTI Investment SE is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 71.00 in MTI Investment SE on November 27, 2024 and sell it today you would earn a total of 33.00 from holding MTI Investment SE or generate 46.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tele2 AB vs. MTI Investment SE
Performance |
| Timeline |
| Tele2 AB |
| MTI Investment SE |
Tele2 AB and MTI Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tele2 AB and MTI Investment
The main advantage of trading using opposite Tele2 AB and MTI Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, MTI Investment 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 MTI Investment will offset losses from the drop in MTI Investment's long position.| Tele2 AB vs. Telia Company AB | Tele2 AB vs. Skanska AB | Tele2 AB vs. AB Electrolux | Tele2 AB vs. Svenska Handelsbanken 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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