Correlation Between Moleculin Biotech and Ericsson

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Can any of the company-specific risk be diversified away by investing in both Moleculin Biotech and Ericsson 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 Moleculin Biotech and Ericsson into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Moleculin Biotech CS and Ericsson Lm Tel, you can compare the effects of market volatilities on Moleculin Biotech and Ericsson 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 Moleculin Biotech with a short position of Ericsson. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moleculin Biotech and Ericsson.

Diversification Opportunities for Moleculin Biotech and Ericsson

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Moleculin and Ericsson is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Moleculin Biotech CS and Ericsson Lm Tel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ericsson Lm Tel and Moleculin Biotech 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 Moleculin Biotech CS are associated (or correlated) with Ericsson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ericsson Lm Tel has no effect on the direction of Moleculin Biotech i.e., Moleculin Biotech and Ericsson go up and down completely randomly.

Pair Corralation between Moleculin Biotech and Ericsson

Given the investment horizon of 90 days Moleculin Biotech CS is expected to generate 1.36 times more return on investment than Ericsson. However, Moleculin Biotech is 1.36 times more volatile than Ericsson Lm Tel. It trades about 0.09 of its potential returns per unit of risk. Ericsson Lm Tel is currently generating about 0.06 per unit of risk. If you would invest  113.00  in Moleculin Biotech CS on August 28, 2022 and sell it today you would earn a total of  16.00  from holding Moleculin Biotech CS or generate 14.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy97.73%
ValuesDaily Returns

Moleculin Biotech CS  vs.  Ericsson Lm Tel

 Performance (%) 
       Timeline  
Moleculin Biotech 
Moleculin Performance
0 of 100
Over the last 90 days Moleculin Biotech CS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Moleculin Price Channel

Ericsson Lm Tel 
Ericsson Performance
0 of 100
Over the last 90 days Ericsson Lm Tel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ericsson Price Channel

Moleculin Biotech and Ericsson Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Moleculin Biotech and Ericsson

The main advantage of trading using opposite Moleculin Biotech and Ericsson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moleculin Biotech position performs unexpectedly, Ericsson 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 Ericsson will offset losses from the drop in Ericsson's long position.
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The idea behind Moleculin Biotech CS and Ericsson Lm Tel 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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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 Watchlist Optimization module to optimize watchlists to build efficient portfolio or rebalance existing positions based on mean-variance optimization algorithm.

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