Correlation Between Skandinaviska Enskilda and Hang Seng

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

Diversification Opportunities for Skandinaviska Enskilda and Hang Seng

-0.22

Correlation Coefficient

Skandinaviska Enskilda  Hang Seng

Very good diversification

The 3 months correlation between Skandinaviska and Hang is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank 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 Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Hang Seng go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Hang Seng

Assuming the 90 days trading horizon Skandinaviska Enskilda is expected to generate 3.7 times less return on investment than Hang Seng. But when comparing it to its historical volatility, Skandinaviska Enskilda Banken is 1.46 times less risky than Hang Seng. It trades about 0.06 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  467.00  in Hang Seng Bank on October 7, 2024 and sell it today you would earn a total of  693.00  from holding Hang Seng Bank or generate 148.39% 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.  Hang Seng Bank

Skandinaviska Enskilda

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Hang Seng Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hang Seng may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Skandinaviska Enskilda and Hang Seng

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

The idea behind Skandinaviska Enskilda Banken and Hang Seng Bank 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.