Correlation Between Tele2 AB and Telia Company
Can any of the company-specific risk be diversified away by investing in both Tele2 AB and Telia Company 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 Telia Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tele2 AB and Telia Company AB, you can compare the effects of market volatilities on Tele2 AB and Telia Company 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 Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Telia Company.
Diversification Opportunities for Tele2 AB and Telia Company
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tele2 and Telia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Tele2 AB i.e., Tele2 AB and Telia Company go up and down completely randomly.
Pair Corralation between Tele2 AB and Telia Company
Assuming the 90 days trading horizon Tele2 AB is expected to generate 1.05 times more return on investment than Telia Company. However, Tele2 AB is 1.05 times more volatile than Telia Company AB. It trades about 0.07 of its potential returns per unit of risk. Telia Company AB is currently generating about 0.06 per unit of risk. If you would invest 7,985 in Tele2 AB on November 2, 2024 and sell it today you would earn a total of 4,195 from holding Tele2 AB or generate 52.54% 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. Telia Company AB
Performance |
| Timeline |
| Tele2 AB |
| Telia Company |
Tele2 AB and Telia Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tele2 AB and Telia Company
The main advantage of trading using opposite Tele2 AB and Telia Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, Telia Company 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 Telia Company will offset losses from the drop in Telia Company'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 |
| Telia Company vs. Tele2 AB | Telia Company vs. Swedbank AB | Telia Company vs. Svenska Handelsbanken AB | Telia Company vs. Nordea Bank Abp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |