Correlation Between MilDef Group and Truecaller

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

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

Diversification Opportunities for MilDef Group and Truecaller

0.8

Correlation Coefficient

MilDef Group  Truecaller

Very poor diversification

The 3 months correlation between MilDef and Truecaller is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding MilDef Group AB and Truecaller AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truecaller AB and MilDef Group 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 MilDef Group AB are associated (or correlated) with Truecaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truecaller AB has no effect on the direction of MilDef Group i.e., MilDef Group and Truecaller go up and down completely randomly.

Pair Corralation between MilDef Group and Truecaller

Assuming the 90 days trading horizon MilDef Group is expected to generate 1.23 times less return on investment than Truecaller. But when comparing it to its historical volatility, MilDef Group AB is 1.18 times less risky than Truecaller. It trades about 0.21 of its potential returns per unit of risk. Truecaller AB is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,750  in Truecaller AB on September 13, 2024 and sell it today you would earn a total of  1,700  from holding Truecaller AB or generate 45.33% return on investment over 90 days.

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

MilDef Group AB  vs.  Truecaller AB

MilDef Group AB

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MilDef Group AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, MilDef Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Truecaller AB

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Truecaller AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Truecaller sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MilDef Group and Truecaller

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

The idea behind MilDef Group AB and Truecaller 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.