Correlation Between Svenska Handelsbanken and Ratos AB

Can any of the company-specific risk be diversified away by investing in both Svenska Handelsbanken and Ratos 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 Svenska Handelsbanken and Ratos AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Svenska Handelsbanken AB and Ratos AB, you can compare the effects of market volatilities on Svenska Handelsbanken and Ratos 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 Svenska Handelsbanken with a short position of Ratos AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Handelsbanken and Ratos AB.

Diversification Opportunities for Svenska Handelsbanken and Ratos AB

0.91

Correlation Coefficient

Svenska Handelsbanken  Ratos AB

Almost no diversification

The 3 months correlation between Svenska and Ratos is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and Ratos AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ratos AB and Svenska Handelsbanken 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 Svenska Handelsbanken AB are associated (or correlated) with Ratos AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ratos AB has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and Ratos AB go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and Ratos AB

Assuming the 90 days trading horizon Svenska Handelsbanken AB is expected to generate 0.48 times more return on investment than Ratos AB. However, Svenska Handelsbanken AB is 2.09 times less risky than Ratos AB. It trades about 0.41 of its potential returns per unit of risk. Ratos AB is currently generating about 0.1 per unit of risk. If you would invest  14,790  in Svenska Handelsbanken AB on December 1, 2024 and sell it today you would earn a total of  5,090  from holding Svenska Handelsbanken AB or generate 34.42% return on investment over 90 days.

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

Svenska Handelsbanken AB  vs.  Ratos AB

Svenska Handelsbanken

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Svenska Handelsbanken unveiled solid returns over the last few months and may actually be approaching a breakup point.

Ratos AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ratos AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ratos AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Svenska Handelsbanken and Ratos AB

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

The idea behind Svenska Handelsbanken AB and Ratos 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.