Correlation Between Tele2 AB and U S Cellular

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

By analyzing existing cross correlation between Tele2 AB and United States Cellular, you can compare the effects of market volatilities on Tele2 AB and U S Cellular 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 U S Cellular. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and U S Cellular.

Diversification Opportunities for Tele2 AB and U S Cellular

-0.6

Correlation Coefficient

Tele2 AB  U S Cellular

Excellent diversification

The 3 months correlation between Tele2 and USM is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 U S Cellular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Tele2 AB i.e., Tele2 AB and U S Cellular go up and down completely randomly.

Pair Corralation between Tele2 AB and U S Cellular

Assuming the 90 days horizon Tele2 AB is expected to under-perform the U S Cellular. In addition to that, Tele2 AB is 1.22 times more volatile than United States Cellular. It trades about -0.03 of its total potential returns per unit of risk. United States Cellular is currently generating about 0.09 per unit of volatility. If you would invest  5,590  in United States Cellular on September 5, 2024 and sell it today you would earn a total of  741.00  from holding United States Cellular or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Tele2 AB  vs.  United States Cellular

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. In spite of fairly strong basic indicators, Tele2 AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

United States Cellular

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, U S Cellular displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tele2 AB and U S Cellular

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

The idea behind Tele2 AB and United States Cellular 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.