Correlation Between Telefonaktiebolaget and Plano Plano

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

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

Diversification Opportunities for Telefonaktiebolaget and Plano Plano

0.71

Correlation Coefficient

Telefonaktiebolaget  Plano Plano

Poor diversification

The 3 months correlation between Telefonaktiebolaget and Plano is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Plano Plano Desenvolvimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plano Plano Desenvol and Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson are associated (or correlated) with Plano Plano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plano Plano Desenvol has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Plano Plano go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Plano Plano

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.67 times more return on investment than Plano Plano. However, Telefonaktiebolaget LM Ericsson is 1.49 times less risky than Plano Plano. It trades about -0.02 of its potential returns per unit of risk. Plano Plano Desenvolvimento is currently generating about -0.23 per unit of risk. If you would invest  2,420  in Telefonaktiebolaget LM Ericsson on September 3, 2024 and sell it today you would lose (20.00) from holding Telefonaktiebolaget LM Ericsson or give up 0.83% of portfolio value over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  Plano Plano Desenvolvimento

Telefonaktiebolaget

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Plano Plano Desenvol

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plano Plano Desenvolvimento are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Plano Plano is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Telefonaktiebolaget and Plano Plano

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

The idea behind Telefonaktiebolaget LM Ericsson and Plano Plano Desenvolvimento 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.