Correlation Between Swedbank and Svenska Handelsbanken
Can any of the company-specific risk be diversified away by investing in both Swedbank and Svenska Handelsbanken 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 Svenska Handelsbanken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swedbank AB and Svenska Handelsbanken AB, you can compare the effects of market volatilities on Swedbank and Svenska Handelsbanken 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 Svenska Handelsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swedbank and Svenska Handelsbanken.
Diversification Opportunities for Swedbank and Svenska Handelsbanken
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Swedbank and Svenska is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken 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 Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of Swedbank i.e., Swedbank and Svenska Handelsbanken go up and down completely randomly.
Pair Corralation between Swedbank and Svenska Handelsbanken
Assuming the 90 days trading horizon Swedbank is expected to generate 7.48 times less return on investment than Svenska Handelsbanken. But when comparing it to its historical volatility, Swedbank AB is 1.02 times less risky than Svenska Handelsbanken. It trades about 0.02 of its potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 13,180 in Svenska Handelsbanken AB on September 14, 2024 and sell it today you would earn a total of 1,460 from holding Svenska Handelsbanken AB or generate 11.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Swedbank AB vs. Svenska Handelsbanken AB
Performance |
Timeline |
Swedbank AB |
Svenska Handelsbanken |
Swedbank and Svenska Handelsbanken Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Swedbank and Svenska Handelsbanken
The main advantage of trading using opposite Swedbank and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swedbank position performs unexpectedly, Svenska Handelsbanken 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 Svenska Handelsbanken will offset losses from the drop in Svenska Handelsbanken's long position.Swedbank vs. Svenska Handelsbanken AB | Swedbank vs. Nordea Bank Abp | Swedbank vs. Telia Company AB | Swedbank vs. Tele2 AB |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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