Correlation Between Telia Company and Arion Banki

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

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

Diversification Opportunities for Telia Company and Arion Banki

-0.65

Correlation Coefficient

Telia Company  Arion Banki

Excellent diversification

The 3 months correlation between Telia and Arion is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company 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 Telia Company 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 Telia Company 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 Telia Company i.e., Telia Company and Arion Banki go up and down completely randomly.

Pair Corralation between Telia Company and Arion Banki

Assuming the 90 days trading horizon Telia Company AB is expected to under-perform the Arion Banki. But the stock apears to be less risky and, when comparing its historical volatility, Telia Company AB is 1.61 times less risky than Arion Banki. The stock trades about -0.07 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	Weak
Accuracy	98.41%
Values	Daily Returns

Telia Company AB  vs.  Arion banki hf

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Telia Company is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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 Telia Company and Arion Banki

The main advantage of trading using opposite Telia Company and Arion Banki positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telia Company 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 Telia Company 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .