Correlation Between Swedbank and Storskogen Group

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

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

Diversification Opportunities for Swedbank and Storskogen Group

0.44

Correlation Coefficient

Swedbank  Storskogen Group

Very weak diversification

The 3 months correlation between Swedbank and Storskogen is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Storskogen Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storskogen Group 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 Storskogen Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storskogen Group has no effect on the direction of Swedbank i.e., Swedbank and Storskogen Group go up and down completely randomly.

Pair Corralation between Swedbank and Storskogen Group

Assuming the 90 days trading horizon Swedbank is expected to generate 34.97 times less return on investment than Storskogen Group. But when comparing it to its historical volatility, Swedbank AB is 2.59 times less risky than Storskogen Group. It trades about 0.01 of its potential returns per unit of risk. Storskogen Group AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  607.00  in Storskogen Group AB on September 24, 2024 and sell it today you would earn a total of  538.00  from holding Storskogen Group AB or generate 88.63% return on investment over 90 days.

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

Swedbank AB  vs.  Storskogen Group 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.

Storskogen Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Storskogen Group AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Storskogen Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swedbank and Storskogen Group

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

The idea behind Swedbank AB and Storskogen Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.