Correlation Between Tele2 AB and Telenor ASA
Can any of the company-specific risk be diversified away by investing in both Tele2 AB and Telenor ASA 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 Telenor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tele2 AB and Telenor ASA, you can compare the effects of market volatilities on Tele2 AB and Telenor ASA 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 Telenor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Telenor ASA.
Diversification Opportunities for Tele2 AB and Telenor ASA
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tele2 and Telenor is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Telenor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA has no effect on the direction of Tele2 AB i.e., Tele2 AB and Telenor ASA go up and down completely randomly.
Pair Corralation between Tele2 AB and Telenor ASA
Assuming the 90 days horizon Tele2 AB is expected to generate 1.16 times less return on investment than Telenor ASA. But when comparing it to its historical volatility, Tele2 AB is 1.68 times less risky than Telenor ASA. It trades about 0.04 of its potential returns per unit of risk. Telenor ASA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,049 in Telenor ASA on August 27, 2024 and sell it today you would earn a total of 117.00 from holding Telenor ASA or generate 11.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 62.8% |
| Values | Daily Returns |
Tele2 AB vs. Telenor ASA
Performance |
| Timeline |
| Tele2 AB |
| Telenor ASA |
Tele2 AB and Telenor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tele2 AB and Telenor ASA
The main advantage of trading using opposite Tele2 AB and Telenor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, Telenor ASA 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 Telenor ASA will offset losses from the drop in Telenor ASA's long position.| Tele2 AB vs. Proximus NV ADR | Tele2 AB vs. Telstra Limited | Tele2 AB vs. Singapore Telecommunications Limited | Tele2 AB vs. Vodafone Group PLC |
| Telenor ASA vs. Vodafone Group PLC | Telenor ASA vs. KDDI Corp | Telenor ASA vs. Amrica Mvil, SAB | Telenor ASA vs. ATT Inc |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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