Correlation Between High Coast and Svenska Handelsbanken

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

By analyzing existing cross correlation between High Coast Distillery and Svenska Handelsbanken AB, you can compare the effects of market volatilities on High Coast and Svenska Handelsbanken 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 High Coast with a short position of Svenska Handelsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Coast and Svenska Handelsbanken.

Diversification Opportunities for High Coast and Svenska Handelsbanken

0.79

Correlation Coefficient

High Coast  Svenska Handelsbanken

Poor diversification

The 3 months correlation between High and Svenska is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding High Coast Distillery and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and High Coast 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 High Coast Distillery are associated (or correlated) with Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of High Coast i.e., High Coast and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between High Coast and Svenska Handelsbanken

Assuming the 90 days trading horizon High Coast Distillery is expected to generate 2.39 times more return on investment than Svenska Handelsbanken. However, High Coast is 2.39 times more volatile than Svenska Handelsbanken AB. It trades about 0.1 of its potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.11 per unit of risk. If you would invest  3,980  in High Coast Distillery on September 29, 2024 and sell it today you would earn a total of  800.00  from holding High Coast Distillery or generate 20.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

High Coast Distillery  vs.  Svenska Handelsbanken AB

High Coast Distillery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in High Coast Distillery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, High Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Svenska Handelsbanken

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Svenska Handelsbanken may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with High Coast and Svenska Handelsbanken

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

The idea behind High Coast Distillery and Svenska Handelsbanken 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.

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