Correlation Between Svenska Handelsbanken and Swedbank

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

Diversification Opportunities for Svenska Handelsbanken and Swedbank

0.96

Correlation Coefficient

Svenska Handelsbanken  Swedbank

Almost no diversification

The 3 months correlation between Svenska and Swedbank is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank 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 Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and Swedbank go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and Swedbank

Assuming the 90 days trading horizon Svenska Handelsbanken AB is expected to generate 1.0 times more return on investment than Swedbank. However, Svenska Handelsbanken is 1.0 times more volatile than Swedbank AB. It trades about 0.1 of its potential returns per unit of risk. Swedbank AB is currently generating about 0.07 per unit of risk. If you would invest  10,267  in Svenska Handelsbanken AB on December 4, 2024 and sell it today you would earn a total of  9,473  from holding Svenska Handelsbanken AB or generate 92.27% 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.  Swedbank 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 27 (%) 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.

Swedbank AB

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Swedbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Svenska Handelsbanken and Swedbank

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

The idea behind Svenska Handelsbanken AB and Swedbank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..