Correlation Between Skandinaviska Enskilda and Alimak Hek

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

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

Diversification Opportunities for Skandinaviska Enskilda and Alimak Hek

-0.33

Correlation Coefficient

Skandinaviska Enskilda  Alimak Hek

Very good diversification

The 3 months correlation between Skandinaviska and Alimak is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Alimak Hek Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimak Hek Group and Skandinaviska Enskilda 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 Skandinaviska Enskilda Banken are associated (or correlated) with Alimak Hek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimak Hek Group has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Alimak Hek go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Alimak Hek

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to under-perform the Alimak Hek. But the stock apears to be less risky and, when comparing its historical volatility, Skandinaviska Enskilda Banken is 1.2 times less risky than Alimak Hek. The stock trades about -0.01 of its potential returns per unit of risk. The Alimak Hek Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10,680  in Alimak Hek Group on September 14, 2024 and sell it today you would earn a total of  1,060  from holding Alimak Hek Group or generate 9.93% return on investment over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Alimak Hek Group

Skandinaviska Enskilda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skandinaviska Enskilda Banken has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Skandinaviska Enskilda is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Alimak Hek Group

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Skandinaviska Enskilda and Alimak Hek

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

The idea behind Skandinaviska Enskilda Banken and Alimak Hek Group 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.