Correlation Between Telefonaktiebolaget and Excel Corp

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

Diversification Opportunities for Telefonaktiebolaget and Excel Corp

0.15

Correlation Coefficient

Telefonaktiebolaget  Excel Corp

Average diversification

The 3 months correlation between Telefonaktiebolaget and Excel is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Excel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excel Corp 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 Excel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excel Corp has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Excel Corp go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and Excel Corp

Given the investment horizon of 90 days Telefonaktiebolaget LM Ericsson is expected to generate 0.09 times more return on investment than Excel Corp. However, Telefonaktiebolaget LM Ericsson is 11.35 times less risky than Excel Corp. It trades about 0.03 of its potential returns per unit of risk. Excel Corp is currently generating about -0.22 per unit of risk. If you would invest  525.00  in Telefonaktiebolaget LM Ericsson on January 25, 2024 and sell it today you would earn a total of  4.00  from holding Telefonaktiebolaget LM Ericsson or generate 0.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  Excel Corp

Telefonaktiebolaget

Risk-Adjusted Performance

0 of 100

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.

Excel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Excel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Telefonaktiebolaget and Excel Corp

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

The idea behind Telefonaktiebolaget LM Ericsson and Excel Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.