Correlation Between Lattice Semiconductor and Telefonaktiebolaget

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

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

Diversification Opportunities for Lattice Semiconductor and Telefonaktiebolaget

-0.32

Correlation Coefficient

Lattice Semiconductor  Telefonaktiebolaget

Very good diversification

The 3 months correlation between Lattice and Telefonaktiebolaget is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Lattice Semiconductor and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget and Lattice Semiconductor 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 Lattice Semiconductor 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 Lattice Semiconductor i.e., Lattice Semiconductor and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between Lattice Semiconductor and Telefonaktiebolaget

Given the investment horizon of 90 days Lattice Semiconductor is expected to under-perform the Telefonaktiebolaget. In addition to that, Lattice Semiconductor is 2.22 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.12 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.09 per unit of volatility. If you would invest  5,611  in Telefonaktiebolaget LM Ericsson on January 26, 2024 and sell it today you would earn a total of  125.00  from holding Telefonaktiebolaget LM Ericsson or generate 2.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Lattice Semiconductor  vs.  Telefonaktiebolaget LM Ericsso

Lattice Semiconductor

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lattice Semiconductor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Lattice Semiconductor exhibited solid returns over the last few months and may actually be approaching a breakup point.

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. Despite somewhat strong basic indicators, Telefonaktiebolaget is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lattice Semiconductor and Telefonaktiebolaget

The main advantage of trading using opposite Lattice Semiconductor and Telefonaktiebolaget positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lattice Semiconductor 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 Lattice Semiconductor 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.