Correlation Between Telefonaktiebolaget and Best Buy
Can any of the company-specific risk be diversified away by investing in both Telefonaktiebolaget and Best Buy 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 Best Buy 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 Best Buy Co, you can compare the effects of market volatilities on Telefonaktiebolaget and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Telefonaktiebolaget and Best Buy.
Diversification Opportunities for Telefonaktiebolaget and Best Buy
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Telefonaktiebolaget and Best is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and Best Buy go up and down completely randomly.
Pair Corralation between Telefonaktiebolaget and Best Buy
Assuming the 90 days trading horizon Telefonaktiebolaget LM Ericsson is expected to generate 0.76 times more return on investment than Best Buy. However, Telefonaktiebolaget LM Ericsson is 1.32 times less risky than Best Buy. It trades about 0.01 of its potential returns per unit of risk. Best Buy Co is currently generating about -0.16 per unit of risk. If you would invest 5,625 in Telefonaktiebolaget LM Ericsson on January 21, 2024 and sell it today you would earn a total of 5.00 from holding Telefonaktiebolaget LM Ericsson or generate 0.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Telefonaktiebolaget LM Ericsso vs. Best Buy Co
Performance |
| Timeline |
| Telefonaktiebolaget |
| Best Buy |
Telefonaktiebolaget and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Telefonaktiebolaget and Best Buy
The main advantage of trading using opposite Telefonaktiebolaget and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Telefonaktiebolaget position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.| Telefonaktiebolaget vs. Goodbye Kansas Group | Telefonaktiebolaget vs. SaltX Technology Holding | Telefonaktiebolaget vs. Oncopeptides AB |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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