Correlation Between Skyworks Solutions and Telefonaktiebolaget

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

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

Diversification Opportunities for Skyworks Solutions and Telefonaktiebolaget

-0.53

Correlation Coefficient

Skyworks Solutions  Telefonaktiebolaget

Excellent diversification

The 3 months correlation between Skyworks and Telefonaktiebolaget is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Skyworks Solutions and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Skyworks Solutions 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 Skyworks Solutions 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 Skyworks Solutions i.e., Skyworks Solutions and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Skyworks Solutions and Telefonaktiebolaget

Given the investment horizon of 90 days Skyworks Solutions is expected to under-perform the Telefonaktiebolaget. But the stock apears to be less risky and, when comparing its historical volatility, Skyworks Solutions is 1.07 times less risky than Telefonaktiebolaget. The stock trades about -0.09 of its potential returns per unit of risk. The Telefonaktiebolaget LM Ericsson is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  718.00  in Telefonaktiebolaget LM Ericsson on September 12, 2024 and sell it today you would earn a total of  114.00  from holding Telefonaktiebolaget LM Ericsson or generate 15.88% return on investment over 90 days.

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

Skyworks Solutions  vs.  Telefonaktiebolaget LM Ericsso

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Telefonaktiebolaget

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Telefonaktiebolaget exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skyworks Solutions and Telefonaktiebolaget

The main advantage of trading using opposite Skyworks Solutions and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skyworks Solutions 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 Skyworks Solutions 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.