Correlation Between Telefonaktiebolaget and QPR Software

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

Diversification Opportunities for Telefonaktiebolaget and QPR Software

-0.55

Correlation Coefficient

Telefonaktiebolaget  QPR Software

Excellent diversification

The 3 months correlation between Telefonaktiebolaget and QPR is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Telefonaktiebolaget LM Ericsso and QPR Software Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QPR Software Oyj 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 QPR Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QPR Software Oyj has no effect on the direction of Telefonaktiebolaget i.e., Telefonaktiebolaget and QPR Software go up and down completely randomly.

Pair Corralation between Telefonaktiebolaget and QPR Software

Assuming the 90 days trading horizon Telefonaktiebolaget is expected to generate 1.14 times less return on investment than QPR Software. In addition to that, Telefonaktiebolaget is 1.14 times more volatile than QPR Software Oyj. It trades about 0.01 of its total potential returns per unit of risk. QPR Software Oyj is currently generating about 0.01 per unit of volatility. If you would invest  60.00  in QPR Software Oyj on January 31, 2024 and sell it today you would lose (3.00) from holding QPR Software Oyj or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Telefonaktiebolaget LM Ericsso  vs.  QPR Software Oyj

Telefonaktiebolaget

Risk-Adjusted Performance

0 of 100

Weak

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

QPR Software Oyj

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in QPR Software Oyj are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, QPR Software demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Telefonaktiebolaget and QPR Software

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

The idea behind Telefonaktiebolaget LM Ericsson and QPR Software Oyj 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 Commodity Directory module to find actively traded commodities issued by global exchanges.