Correlation Between Tele2 AB and Arion Banki

Can any of the company-specific risk be diversified away by investing in both Tele2 AB and Arion Banki 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 Tele2 AB and Arion Banki into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tele2 AB and Arion banki hf, you can compare the effects of market volatilities on Tele2 AB and Arion Banki 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 Tele2 AB with a short position of Arion Banki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Arion Banki.

Diversification Opportunities for Tele2 AB and Arion Banki

-0.02

Correlation Coefficient

Tele2 AB  Arion Banki

Good diversification

The 3 months correlation between Tele2 and Arion is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf and Tele2 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 Tele2 AB are associated (or correlated) with Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Tele2 AB i.e., Tele2 AB and Arion Banki go up and down completely randomly.

Pair Corralation between Tele2 AB and Arion Banki

Assuming the 90 days trading horizon Tele2 AB is expected to under-perform the Arion Banki. But the stock apears to be less risky and, when comparing its historical volatility, Tele2 AB is 1.62 times less risky than Arion Banki. The stock trades about -0.03 of its potential returns per unit of risk. The Arion banki hf is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,080  in Arion banki hf on September 28, 2024 and sell it today you would earn a total of  265.00  from holding Arion banki hf or generate 24.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Tele2 AB  vs.  Arion banki hf

Tele2 AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tele2 AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Tele2 AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Arion banki hf

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arion Banki unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tele2 AB and Arion Banki

The main advantage of trading using opposite Tele2 AB and Arion Banki positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, Arion Banki 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 Arion Banki will offset losses from the drop in Arion Banki's long position.

The idea behind Tele2 AB and Arion banki hf 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.