Correlation Between SSAB AB and Telefonaktiebolaget

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

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

Diversification Opportunities for SSAB AB and Telefonaktiebolaget

0.3

Correlation Coefficient

SSAB AB  Telefonaktiebolaget

Weak diversification

The 3 months correlation between SSAB and Telefonaktiebolaget is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding SSAB AB ser and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and SSAB AB 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 SSAB AB ser 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 SSAB AB i.e., SSAB AB and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between SSAB AB and Telefonaktiebolaget

Assuming the 90 days trading horizon SSAB AB is expected to generate 1.74 times less return on investment than Telefonaktiebolaget. In addition to that, SSAB AB is 1.3 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about 0.08 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.19 per unit of volatility. If you would invest  648.00  in Telefonaktiebolaget LM Ericsson on September 12, 2024 and sell it today you would earn a total of  144.00  from holding Telefonaktiebolaget LM Ericsson or generate 22.22% return on investment over 90 days.

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

SSAB AB ser  vs.  Telefonaktiebolaget LM Ericsso

SSAB AB ser

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB ser are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SSAB AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Telefonaktiebolaget

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 15 (%) 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.

Pair Trading with SSAB AB and Telefonaktiebolaget

The main advantage of trading using opposite SSAB AB and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSAB AB 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 SSAB AB ser 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..