Correlation Between Telefonaktiebolaget and SSAB AB

Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and SSAB AB 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 SSAB AB 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 SSAB AB ser, you can compare the effects of market volatilities on Telefonaktiebolaget and SSAB AB 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 SSAB AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and SSAB AB.

Diversification Opportunities for Telefonaktiebolaget and SSAB AB

0.21

Correlation Coefficient

Telefonaktiebolaget  SSAB AB

Modest diversification

The 3 months correlation between Telefonaktiebolaget and SSAB is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and SSAB AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB ser 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 SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB ser has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and SSAB AB go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and SSAB AB

Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.76 times more return on investment than SSAB AB. However, Telefonaktiebolaget LM Ericsson is 1.32 times less risky than SSAB AB. It trades about 0.18 of its potential returns per unit of risk. SSAB AB ser is currently generating about 0.05 per unit of risk. If you would invest  653.00  in Telefonaktiebolaget LM Ericsson on September 14, 2024 and sell it today you would earn a total of  134.00  from holding Telefonaktiebolaget LM Ericsson or generate 20.52% return on investment over 90 days.

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

Telefonaktiebolaget LM Ericsso  vs.  SSAB AB ser

Telefonaktiebolaget

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Telefonaktiebolaget demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SSAB AB ser

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB ser are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, SSAB AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Telefonaktiebolaget and SSAB AB

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

The idea behind Telefonaktiebolaget LM Ericsson and SSAB AB ser 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.