Correlation Between Swedbank and Vitec Software

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

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

Diversification Opportunities for Swedbank and Vitec Software

0.48

Correlation Coefficient

Swedbank  Vitec Software

Very weak diversification

The 3 months correlation between Swedbank and Vitec is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Vitec Software Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vitec Software 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 Vitec Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vitec Software Group has no effect on the direction of Swedbank i.e., Swedbank and Vitec Software go up and down completely randomly.

Pair Corralation between Swedbank and Vitec Software

Assuming the 90 days trading horizon Swedbank AB is expected to generate 0.35 times more return on investment than Vitec Software. However, Swedbank AB is 2.9 times less risky than Vitec Software. It trades about 0.68 of its potential returns per unit of risk. Vitec Software Group is currently generating about 0.08 per unit of risk. If you would invest  21,570  in Swedbank AB on October 24, 2024 and sell it today you would earn a total of  2,230  from holding Swedbank AB or generate 10.34% 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.  Vitec Software Group

Swedbank AB

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 14 (%) 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.

Vitec Software Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vitec Software Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vitec Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swedbank and Vitec Software

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

The idea behind Swedbank AB and Vitec Software Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.