Correlation Between BDO Unibank and Swedbank

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

By analyzing existing cross correlation between BDO Unibank ADR and Swedbank AB, you can compare the effects of market volatilities on BDO Unibank and Swedbank 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 BDO Unibank with a short position of Swedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of BDO Unibank and Swedbank.

Diversification Opportunities for BDO Unibank and Swedbank

0.72

Correlation Coefficient

BDO Unibank  Swedbank

Poor diversification

The 3 months correlation between BDO and Swedbank is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding BDO Unibank ADR and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB and BDO Unibank 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 BDO Unibank ADR are associated (or correlated) with Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of BDO Unibank i.e., BDO Unibank and Swedbank go up and down completely randomly.

Pair Corralation between BDO Unibank and Swedbank

Assuming the 90 days horizon BDO Unibank is expected to generate 2.72 times less return on investment than Swedbank. In addition to that, BDO Unibank is 1.39 times more volatile than Swedbank AB. It trades about 0.04 of its total potential returns per unit of risk. Swedbank AB is currently generating about 0.15 per unit of volatility. If you would invest  1,988  in Swedbank AB on December 29, 2024 and sell it today you would earn a total of  351.00  from holding Swedbank AB or generate 17.66% return on investment over 90 days.

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

BDO Unibank ADR  vs.  Swedbank AB

BDO Unibank ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BDO Unibank ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BDO Unibank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Swedbank AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Swedbank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BDO Unibank and Swedbank

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

The idea behind BDO Unibank ADR and Swedbank AB 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.