Correlation Between H M and Svenska Handelsbanken

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

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

Diversification Opportunities for H M and Svenska Handelsbanken

-0.4

Correlation Coefficient

H M  Svenska Handelsbanken

Very good diversification

The 3 months correlation between HM-B and Svenska is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and H M 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 H M Hennes 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 H M i.e., H M and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between H M and Svenska Handelsbanken

Assuming the 90 days trading horizon H M Hennes is expected to under-perform the Svenska Handelsbanken. In addition to that, H M is 1.24 times more volatile than Svenska Handelsbanken AB. It trades about -0.1 of its total potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.06 per unit of volatility. If you would invest  10,950  in Svenska Handelsbanken AB on December 31, 2024 and sell it today you would earn a total of  525.00  from holding Svenska Handelsbanken AB or generate 4.79% return on investment over 90 days.

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

H M Hennes  vs.  Svenska Handelsbanken AB

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Svenska Handelsbanken

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Svenska Handelsbanken is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with H M and Svenska Handelsbanken

The main advantage of trading using opposite H M and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H M 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 H M Hennes 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.