Correlation Between Skandinaviska Enskilda and Microlise Group

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

By analyzing existing cross correlation between Skandinaviska Enskilda Banken and Microlise Group PLC, you can compare the effects of market volatilities on Skandinaviska Enskilda and Microlise Group 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 Skandinaviska Enskilda with a short position of Microlise Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and Microlise Group.

Diversification Opportunities for Skandinaviska Enskilda and Microlise Group

0.56

Correlation Coefficient

Skandinaviska Enskilda  Microlise Group

Very weak diversification

The 3 months correlation between Skandinaviska and Microlise is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Microlise Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microlise Group PLC and Skandinaviska Enskilda 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 Skandinaviska Enskilda Banken are associated (or correlated) with Microlise Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microlise Group PLC has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Microlise Group go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Microlise Group

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to generate 0.28 times more return on investment than Microlise Group. However, Skandinaviska Enskilda Banken is 3.51 times less risky than Microlise Group. It trades about -0.04 of its potential returns per unit of risk. Microlise Group PLC is currently generating about -0.08 per unit of risk. If you would invest  16,100  in Skandinaviska Enskilda Banken on September 12, 2024 and sell it today you would lose (460.00) from holding Skandinaviska Enskilda Banken or give up 2.86% of portfolio value over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Microlise Group PLC

Skandinaviska Enskilda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skandinaviska Enskilda Banken has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Skandinaviska Enskilda is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Microlise Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microlise Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Skandinaviska Enskilda and Microlise Group

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

The idea behind Skandinaviska Enskilda Banken and Microlise Group PLC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.