Correlation Between Telefonaktiebolaget and Procter Gamble

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

Diversification Opportunities for Telefonaktiebolaget and Procter Gamble

0.0

Correlation Coefficient

Telefonaktiebolaget  Procter Gamble

Pay attention - limited upside

The 3 months correlation between Telefonaktiebolaget and Procter is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Procter Gamble go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Procter Gamble

If you would invest  4,989  in The Procter Gamble on March 22, 2024 and sell it today you would earn a total of  1,621  from holding The Procter Gamble or generate 32.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  The Procter Gamble

Telefonaktiebolaget

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Telefonaktiebolaget LM Ericsson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefonaktiebolaget is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Procter Gamble

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Procter Gamble are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Procter Gamble sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonaktiebolaget and Procter Gamble

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

The idea behind Telefonaktiebolaget LM Ericsson and The Procter Gamble 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.