Correlation Between National Australia and Svenska Handelsbanken

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

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

Diversification Opportunities for National Australia and Svenska Handelsbanken

-0.49

Correlation Coefficient

National Australia  Svenska Handelsbanken

Very good diversification

The 3 months correlation between National and Svenska is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding National Australia Bank and Svenska Handelsbanken PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and National Australia 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 National Australia Bank 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 National Australia i.e., National Australia and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between National Australia and Svenska Handelsbanken

Assuming the 90 days horizon National Australia Bank is expected to under-perform the Svenska Handelsbanken. In addition to that, National Australia is 1.65 times more volatile than Svenska Handelsbanken PK. It trades about -0.03 of its total potential returns per unit of risk. Svenska Handelsbanken PK is currently generating about 0.26 per unit of volatility. If you would invest  459.00  in Svenska Handelsbanken PK on December 30, 2024 and sell it today you would earn a total of  111.00  from holding Svenska Handelsbanken PK or generate 24.18% return on investment over 90 days.

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

National Australia Bank  vs.  Svenska Handelsbanken PK

National Australia Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Australia Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, National Australia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Svenska Handelsbanken

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken PK are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Svenska Handelsbanken showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Australia and Svenska Handelsbanken

The main advantage of trading using opposite National Australia and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Australia 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 National Australia Bank and Svenska Handelsbanken PK 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.