Correlation Between Goodbye Kansas and Telefonaktiebolaget

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

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

Diversification Opportunities for Goodbye Kansas and Telefonaktiebolaget

0.54

Correlation Coefficient

Goodbye Kansas  Telefonaktiebolaget

Very weak diversification

The 3 months correlation between Goodbye and Telefonaktiebolaget is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Goodbye Kansas Group and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Goodbye Kansas 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 Goodbye Kansas Group 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 Goodbye Kansas i.e., Goodbye Kansas and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Goodbye Kansas and Telefonaktiebolaget

Assuming the 90 days trading horizon Goodbye Kansas Group is expected to generate 3.92 times more return on investment than Telefonaktiebolaget. However, Goodbye Kansas is 3.92 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.11 of its potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.22 per unit of risk. If you would invest  105.00  in Goodbye Kansas Group on September 17, 2024 and sell it today you would earn a total of  37.00  from holding Goodbye Kansas Group or generate 35.24% return on investment over 90 days.

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

Goodbye Kansas Group  vs.  Telefonaktiebolaget LM Ericsso

Goodbye Kansas Group

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Goodbye Kansas Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, Goodbye Kansas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Telefonaktiebolaget

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Telefonaktiebolaget sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Goodbye Kansas and Telefonaktiebolaget

The main advantage of trading using opposite Goodbye Kansas and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Goodbye Kansas 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 Goodbye Kansas Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.