Correlation Between Telia Company and Mills Music

Can any of the company-specific risk be diversified away by investing in both Telia Company and Mills Music 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 Mills Music 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 Mills Music Trust, you can compare the effects of market volatilities on Telia Company and Mills Music 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 Mills Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telia Company and Mills Music.

Diversification Opportunities for Telia Company and Mills Music

0.49

Correlation Coefficient

Telia Company  Mills Music

Very weak diversification

The 3 months correlation between Telia and Mills is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company AB and Mills Music Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mills Music Trust 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 Mills Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mills Music Trust has no effect on the direction of Telia Company i.e., Telia Company and Mills Music go up and down completely randomly.

Pair Corralation between Telia Company and Mills Music

Assuming the 90 days horizon Telia Company AB is expected to generate 0.86 times more return on investment than Mills Music. However, Telia Company AB is 1.16 times less risky than Mills Music. It trades about 0.13 of its potential returns per unit of risk. Mills Music Trust is currently generating about 0.07 per unit of risk. If you would invest  261.00  in Telia Company AB on September 3, 2024 and sell it today you would earn a total of  49.00  from holding Telia Company AB or generate 18.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	65.63%
Values	Daily Returns

Telia Company AB  vs.  Mills Music Trust

Telia Company

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Telia Company reported solid returns over the last few months and may actually be approaching a breakup point.

Mills Music Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mills Music Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Mills Music unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telia Company and Mills Music

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

The idea behind Telia Company AB and Mills Music Trust 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 .