Correlation Between Telefonaktiebolaget and Extreme Networks
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Extreme Networks 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 Extreme Networks 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 Extreme Networks, you can compare the effects of market volatilities on Telefonaktiebolaget and Extreme Networks 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 Extreme Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Extreme Networks.
Diversification Opportunities for Telefonaktiebolaget and Extreme Networks
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Telefonaktiebolaget and Extreme is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Extreme Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extreme Networks 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 Extreme Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extreme Networks has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Extreme Networks go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Extreme Networks
Given the investment horizon of 90 days Telefonaktiebolaget LM Ericsson is expected to generate 1.05 times more return on investment than Extreme Networks. However, Telefonaktiebolaget is 1.05 times more volatile than Extreme Networks. It trades about -0.03 of its potential returns per unit of risk. Extreme Networks is currently generating about -0.09 per unit of risk. If you would invest 523.00 in Telefonaktiebolaget LM Ericsson on January 20, 2024 and sell it today you would lose (17.00) from holding Telefonaktiebolaget LM Ericsson or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Extreme Networks
Performance |
| Timeline |
| Telefonaktiebolaget |
| Extreme Networks |
Telefonaktiebolaget and Extreme Networks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Extreme Networks
The main advantage of trading using opposite Telefonaktiebolaget and Extreme Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Extreme Networks 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 Extreme Networks will offset losses from the drop in Extreme Networks' long position.| Telefonaktiebolaget vs. Nokia Corp ADR | Telefonaktiebolaget vs. Marvell Technology Group | Telefonaktiebolaget vs. Qorvo Inc | Telefonaktiebolaget vs. Skyworks Solutions |
| Extreme Networks vs. Knowles Cor | Extreme Networks vs. KVH Industries | Extreme Networks vs. Comtech Telecommunications Corp | Extreme Networks vs. EchoStar |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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