Correlation Between AEGEAN AIRLINES and Skandinaviska Enskilda

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

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

Diversification Opportunities for AEGEAN AIRLINES and Skandinaviska Enskilda

0.36

Correlation Coefficient

AEGEAN AIRLINES  Skandinaviska Enskilda

Weak diversification

The 3 months correlation between AEGEAN and Skandinaviska is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with Skandinaviska Enskilda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skandinaviska Enskilda has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and Skandinaviska Enskilda

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 1.07 times less return on investment than Skandinaviska Enskilda. In addition to that, AEGEAN AIRLINES is 1.09 times more volatile than Skandinaviska Enskilda Banken. It trades about 0.14 of its total potential returns per unit of risk. Skandinaviska Enskilda Banken is currently generating about 0.17 per unit of volatility. If you would invest  1,327  in Skandinaviska Enskilda Banken on December 2, 2024 and sell it today you would earn a total of  203.00  from holding Skandinaviska Enskilda Banken or generate 15.3% return on investment over 90 days.

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

AEGEAN AIRLINES  vs.  Skandinaviska Enskilda Banken

AEGEAN AIRLINES

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AEGEAN AIRLINES are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, AEGEAN AIRLINES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Skandinaviska Enskilda

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Skandinaviska Enskilda reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AEGEAN AIRLINES and Skandinaviska Enskilda

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

The idea behind AEGEAN AIRLINES and Skandinaviska Enskilda Banken 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.