Correlation Between EXFO and Telefonaktiebolaget

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

By analyzing existing cross correlation between EXFO Inc and Telefonaktiebolaget LM Ericsson, you can compare the effects of market volatilities on EXFO and Telefonaktiebolaget 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 EXFO with a short position of Telefonaktiebolaget. Check out your portfolio center. Please also check ongoing floating volatility patterns of EXFO and Telefonaktiebolaget.

Diversification Opportunities for EXFO and Telefonaktiebolaget

0.0

Correlation Coefficient

EXFO  Telefonaktiebolaget

Pay attention - limited upside

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

Pair Corralation between EXFO and Telefonaktiebolaget

If you would invest (100.00) in EXFO Inc on January 20, 2024 and sell it today you would earn a total of  100.00  from holding EXFO Inc or generate -100.0% return on investment over 90 days.

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

EXFO Inc  vs.  Telefonaktiebolaget LM Ericsso

EXFO Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXFO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, EXFO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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 latest conflicting performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EXFO and Telefonaktiebolaget

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

The idea behind EXFO Inc and Telefonaktiebolaget LM Ericsson 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.