Correlation Between Skandinaviska Enskilda and China Resources

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

Diversification Opportunities for Skandinaviska Enskilda and China Resources

-0.11

Correlation Coefficient

Skandinaviska Enskilda  China Resources

Good diversification

The 3 months correlation between Skandinaviska and China is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and China Resources go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and China Resources

Assuming the 90 days trading horizon Skandinaviska Enskilda is expected to generate 2.08 times less return on investment than China Resources. But when comparing it to its historical volatility, Skandinaviska Enskilda Banken is 2.42 times less risky than China Resources. It trades about 0.06 of its potential returns per unit of risk. China Resources Land is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  135.00  in China Resources Land on September 23, 2024 and sell it today you would earn a total of  135.00  from holding China Resources Land or generate 100.0% 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.  China Resources Land

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. Despite nearly stable fundamental drivers, Skandinaviska Enskilda is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Resources Land

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Land are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skandinaviska Enskilda and China Resources

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

The idea behind Skandinaviska Enskilda Banken and China Resources Land 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.