Correlation Between OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda

Can any of the company-specific risk be diversified away by investing in both OVERSEA CHINUNSPADR/2 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 OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between OVERSEA CHINUNSPADR2 and Skandinaviska Enskilda Banken, you can compare the effects of market volatilities on OVERSEA CHINUNSPADR/2 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 OVERSEA CHINUNSPADR/2 with a short position of Skandinaviska Enskilda. Check out your portfolio center. Please also check ongoing floating volatility patterns of OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda.

Diversification Opportunities for OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda

-0.12

Correlation Coefficient

OVERSEA CHINUNSPADR/2  Skandinaviska Enskilda

Good diversification

The 3 months correlation between OVERSEA and Skandinaviska is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding OVERSEA CHINUNSPADR2 and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda and OVERSEA CHINUNSPADR/2 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 OVERSEA CHINUNSPADR2 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 OVERSEA CHINUNSPADR/2 i.e., OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda

Assuming the 90 days trading horizon OVERSEA CHINUNSPADR/2 is expected to generate 6.14 times less return on investment than Skandinaviska Enskilda. But when comparing it to its historical volatility, OVERSEA CHINUNSPADR2 is 1.4 times less risky than Skandinaviska Enskilda. It trades about 0.04 of its potential returns per unit of risk. Skandinaviska Enskilda Banken is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,313  in Skandinaviska Enskilda Banken on December 30, 2024 and sell it today you would earn a total of  248.00  from holding Skandinaviska Enskilda Banken or generate 18.89% return on investment over 90 days.

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

OVERSEA CHINUNSPADR2  vs.  Skandinaviska Enskilda Banken

OVERSEA CHINUNSPADR/2

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OVERSEA CHINUNSPADR2 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, OVERSEA CHINUNSPADR/2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain fundamental drivers, Skandinaviska Enskilda reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda

The main advantage of trading using opposite OVERSEA CHINUNSPADR/2 and Skandinaviska Enskilda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OVERSEA CHINUNSPADR/2 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 OVERSEA CHINUNSPADR2 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.