Correlation Between Swedbank and Bonava AB

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

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

Diversification Opportunities for Swedbank and Bonava AB

-0.4

Correlation Coefficient

Swedbank  Bonava AB

Very good diversification

The 3 months correlation between Swedbank and Bonava is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Bonava AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bonava AB and Swedbank 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 Swedbank AB are associated (or correlated) with Bonava AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bonava AB has no effect on the direction of Swedbank i.e., Swedbank and Bonava AB go up and down completely randomly.

Pair Corralation between Swedbank and Bonava AB

Assuming the 90 days trading horizon Swedbank AB is expected to generate 0.44 times more return on investment than Bonava AB. However, Swedbank AB is 2.29 times less risky than Bonava AB. It trades about 0.11 of its potential returns per unit of risk. Bonava AB is currently generating about 0.0 per unit of risk. If you would invest  20,700  in Swedbank AB on September 8, 2024 and sell it today you would earn a total of  1,250  from holding Swedbank AB or generate 6.04% return on investment over 90 days.

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

Swedbank AB  vs.  Bonava AB

Swedbank AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedbank AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Swedbank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Bonava AB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bonava AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Bonava AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swedbank and Bonava AB

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

The idea behind Swedbank AB and Bonava 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.