Correlation Between Swedbank and Investor

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

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

Diversification Opportunities for Swedbank and Investor

-0.36

Correlation Coefficient

Swedbank  Investor

Very good diversification

The 3 months correlation between Swedbank and Investor is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Investor AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB ser 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 Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB ser has no effect on the direction of Swedbank i.e., Swedbank and Investor go up and down completely randomly.

Pair Corralation between Swedbank and Investor

Assuming the 90 days trading horizon Swedbank AB is expected to generate 1.62 times more return on investment than Investor. However, Swedbank is 1.62 times more volatile than Investor AB ser. It trades about 0.13 of its potential returns per unit of risk. Investor AB ser is currently generating about -0.08 per unit of risk. If you would invest  20,600  in Swedbank AB on October 12, 2024 and sell it today you would earn a total of  1,920  from holding Swedbank AB or generate 9.32% return on investment over 90 days.

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

Swedbank AB  vs.  Investor AB ser

Swedbank AB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Swedbank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Swedbank and Investor

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

The idea behind Swedbank AB and Investor AB ser 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.