Correlation Between Telia Company and Tokmanni Group

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Can any of the company-specific risk be diversified away by investing in both Telia Company and Tokmanni Group 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 Telia Company and Tokmanni Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telia Company AB and Tokmanni Group Oyj, you can compare the effects of market volatilities on Telia Company and Tokmanni Group 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 Telia Company with a short position of Tokmanni Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telia Company and Tokmanni Group.

Diversification Opportunities for Telia Company and Tokmanni Group

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Telia and Tokmanni is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company AB and Tokmanni Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokmanni Group Oyj and Telia Company 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 Telia Company AB are associated (or correlated) with Tokmanni Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokmanni Group Oyj has no effect on the direction of Telia Company i.e., Telia Company and Tokmanni Group go up and down completely randomly.

Pair Corralation between Telia Company and Tokmanni Group

Assuming the 90 days trading horizon Telia Company is expected to generate 18.53 times less return on investment than Tokmanni Group. But when comparing it to its historical volatility, Telia Company AB is 2.48 times less risky than Tokmanni Group. It trades about 0.02 of its potential returns per unit of risk. Tokmanni Group Oyj is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,028  in Tokmanni Group Oyj on August 25, 2024 and sell it today you would earn a total of  102.00  from holding Tokmanni Group Oyj or generate 9.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Telia Company AB  vs.  Tokmanni Group Oyj

 Performance 
       Timeline  
Telia Company 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Telia Company AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Telia Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Tokmanni Group Oyj 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Tokmanni Group Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, Tokmanni Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Telia Company and Tokmanni Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telia Company and Tokmanni Group

The main advantage of trading using opposite Telia Company and Tokmanni Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telia Company position performs unexpectedly, Tokmanni Group 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 Tokmanni Group will offset losses from the drop in Tokmanni Group's long position.
The idea behind Telia Company AB and Tokmanni Group Oyj 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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