Correlation Between Telefonaktiebolaget and BlackBerry

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Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and BlackBerry 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 Telefonaktiebolaget and BlackBerry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Telefonaktiebolaget LM Ericsson and BlackBerry, you can compare the effects of market volatilities on Telefonaktiebolaget and BlackBerry 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 Telefonaktiebolaget with a short position of BlackBerry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and BlackBerry.

Diversification Opportunities for Telefonaktiebolaget and BlackBerry

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Telefonaktiebolaget and BlackBerry is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and BlackBerry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackBerry and Telefonaktiebolaget 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 Telefonaktiebolaget LM Ericsson are associated (or correlated) with BlackBerry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackBerry has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and BlackBerry go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and BlackBerry

Given the investment horizon of 90 days Telefonaktiebolaget is expected to generate 6.2 times less return on investment than BlackBerry. But when comparing it to its historical volatility, Telefonaktiebolaget LM Ericsson is 1.97 times less risky than BlackBerry. It trades about 0.03 of its potential returns per unit of risk. BlackBerry is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  261.00  in BlackBerry on January 25, 2024 and sell it today you would earn a total of  28.00  from holding BlackBerry or generate 10.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Telefonaktiebolaget LM Ericsso  vs.  BlackBerry

 Performance 
       Timeline  
Telefonaktiebolaget 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Telefonaktiebolaget is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
BlackBerry 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BlackBerry has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, BlackBerry is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Telefonaktiebolaget and BlackBerry Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Telefonaktiebolaget and BlackBerry

The main advantage of trading using opposite Telefonaktiebolaget and BlackBerry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, BlackBerry 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 BlackBerry will offset losses from the drop in BlackBerry's long position.
The idea behind Telefonaktiebolaget LM Ericsson and BlackBerry 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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