Correlation Between Mattel and Telia Company

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

By analyzing existing cross correlation between Mattel Inc and Telia Company AB, you can compare the effects of market volatilities on Mattel and Telia Company 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 Mattel with a short position of Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mattel and Telia Company.

Diversification Opportunities for Mattel and Telia Company

0.05

Correlation Coefficient

Mattel  Telia Company

Significant diversification

The 3 months correlation between Mattel and Telia is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mattel Inc and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company and Mattel 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 Mattel Inc are associated (or correlated) with Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Mattel i.e., Mattel and Telia Company go up and down completely randomly.

Pair Corralation between Mattel and Telia Company

Considering the 90-day investment horizon Mattel is expected to generate 13.8 times less return on investment than Telia Company. But when comparing it to its historical volatility, Mattel Inc is 1.91 times less risky than Telia Company. It trades about 0.02 of its potential returns per unit of risk. Telia Company AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  261.00  in Telia Company AB on September 4, 2024 and sell it today you would earn a total of  49.00  from holding Telia Company AB or generate 18.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	64.06%
Values	Daily Returns

Mattel Inc  vs.  Telia Company AB

Mattel Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mattel Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Telia Company

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Telia Company reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mattel and Telia Company

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

The idea behind Mattel Inc and Telia Company AB 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 Stocks Directory module to find actively traded stocks across global markets.