Correlation Between Skandinaviska Enskilda and Cantargia

Can any of the company-specific risk be diversified away by investing in both Skandinaviska Enskilda and Cantargia 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 Cantargia 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 Cantargia AB, you can compare the effects of market volatilities on Skandinaviska Enskilda and Cantargia 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 Cantargia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and Cantargia.

Diversification Opportunities for Skandinaviska Enskilda and Cantargia

-0.61

Correlation Coefficient

Skandinaviska Enskilda  Cantargia

Excellent diversification

The 3 months correlation between Skandinaviska and Cantargia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Cantargia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cantargia AB 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 Cantargia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cantargia AB has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Cantargia go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Cantargia

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to generate 0.38 times more return on investment than Cantargia. However, Skandinaviska Enskilda Banken is 2.65 times less risky than Cantargia. It trades about 0.23 of its potential returns per unit of risk. Cantargia AB is currently generating about -0.02 per unit of risk. If you would invest  15,340  in Skandinaviska Enskilda Banken on November 29, 2024 and sell it today you would earn a total of  2,520  from holding Skandinaviska Enskilda Banken or generate 16.43% return on investment over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Cantargia AB

Skandinaviska Enskilda

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Skandinaviska Enskilda unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cantargia AB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Skandinaviska Enskilda and Cantargia

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

The idea behind Skandinaviska Enskilda Banken and Cantargia 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.