Correlation Between Skandinaviska Enskilda and Lifco AB

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

Diversification Opportunities for Skandinaviska Enskilda and Lifco AB

0.27

Correlation Coefficient

Skandinaviska Enskilda  Lifco AB

Modest diversification

The 3 months correlation between Skandinaviska and Lifco is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Lifco AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifco 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 Lifco AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifco AB has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Lifco AB go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Lifco AB

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to under-perform the Lifco AB. But the stock apears to be less risky and, when comparing its historical volatility, Skandinaviska Enskilda Banken is 1.19 times less risky than Lifco AB. The stock trades about -0.03 of its potential returns per unit of risk. The Lifco AB is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  32,900  in Lifco AB on September 13, 2024 and sell it today you would earn a total of  600.00  from holding Lifco AB or generate 1.82% return on investment over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Lifco AB

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.

Lifco AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lifco AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Lifco AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Skandinaviska Enskilda and Lifco AB

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

The idea behind Skandinaviska Enskilda Banken and Lifco 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.