Correlation Between Superior Plus and Telefonaktiebolaget

Can any of the company-specific risk be diversified away by investing in both Superior Plus and Telefonaktiebolaget 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 Superior Plus and Telefonaktiebolaget into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Superior Plus Corp and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on Superior Plus and Telefonaktiebolaget 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 Superior Plus with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and Telefonaktiebolaget.

Diversification Opportunities for Superior Plus and Telefonaktiebolaget

-0.66

Correlation Coefficient

Superior Plus  Telefonaktiebolaget

Excellent diversification

The 3 months correlation between Superior and Telefonaktiebolaget is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Superior Plus 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 Superior Plus Corp are associated (or correlated) with Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of Superior Plus i.e., Superior Plus and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Superior Plus and Telefonaktiebolaget

Assuming the 90 days horizon Superior Plus is expected to generate 1.17 times less return on investment than Telefonaktiebolaget. In addition to that, Superior Plus is 1.57 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.08 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.14 per unit of volatility. If you would invest  755.00  in Telefonaktiebolaget LM Ericsson on September 13, 2024 and sell it today you would earn a total of  32.00  from holding Telefonaktiebolaget LM Ericsson or generate 4.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  Telefonaktiebolaget LM Ericsso

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telefonaktiebolaget

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Telefonaktiebolaget reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Superior Plus and Telefonaktiebolaget

The main advantage of trading using opposite Superior Plus and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus position performs unexpectedly, Telefonaktiebolaget 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 Telefonaktiebolaget will offset losses from the drop in Telefonaktiebolaget's long position.

The idea behind Superior Plus Corp and Telefonaktiebolaget LM Ericsson 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.