Correlation Between Plano Plano and Telefonaktiebolaget

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

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

Diversification Opportunities for Plano Plano and Telefonaktiebolaget

0.71

Correlation Coefficient

Plano Plano  Telefonaktiebolaget

Poor diversification

The 3 months correlation between Plano and Telefonaktiebolaget is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Plano Plano Desenvolvimento and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Plano Plano 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 Plano Plano Desenvolvimento 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 Plano Plano i.e., Plano Plano and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Plano Plano and Telefonaktiebolaget

Assuming the 90 days trading horizon Plano Plano Desenvolvimento is expected to under-perform the Telefonaktiebolaget. In addition to that, Plano Plano is 1.49 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.23 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about -0.02 per unit of volatility. 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

Plano Plano Desenvolvimento  vs.  Telefonaktiebolaget LM Ericsso

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.

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.

Pair Trading with Plano Plano and Telefonaktiebolaget

The main advantage of trading using opposite Plano Plano and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plano Plano 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 Plano Plano Desenvolvimento 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.