Correlation Between Svenska Handelsbanken and TF Bank

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

Diversification Opportunities for Svenska Handelsbanken and TF Bank

0.78

Correlation Coefficient

Svenska Handelsbanken  TF Bank

Poor diversification

The 3 months correlation between Svenska and TFBANK is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank 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 TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and TF Bank go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and TF Bank

Assuming the 90 days trading horizon Svenska Handelsbanken is expected to generate 2.75 times less return on investment than TF Bank. But when comparing it to its historical volatility, Svenska Handelsbanken AB is 1.63 times less risky than TF Bank. It trades about 0.14 of its potential returns per unit of risk. TF Bank AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  26,500  in TF Bank AB on September 4, 2024 and sell it today you would earn a total of  9,300  from holding TF Bank AB or generate 35.09% return on investment over 90 days.

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

Svenska Handelsbanken AB  vs.  TF Bank AB

Svenska Handelsbanken

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Svenska Handelsbanken may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TF Bank AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Svenska Handelsbanken and TF Bank

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

The idea behind Svenska Handelsbanken AB and TF Bank 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.