Correlation Between TF Bank and Swedbank

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

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

Diversification Opportunities for TF Bank and Swedbank

-0.05

Correlation Coefficient

TF Bank  Swedbank

Good diversification

The 3 months correlation between TFBANK and Swedbank is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding TF Bank AB and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB and TF Bank 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 TF Bank AB are associated (or correlated) with Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of TF Bank i.e., TF Bank and Swedbank go up and down completely randomly.

Pair Corralation between TF Bank and Swedbank

Assuming the 90 days trading horizon TF Bank AB is expected to generate 1.6 times more return on investment than Swedbank. However, TF Bank is 1.6 times more volatile than Swedbank AB. It trades about 0.23 of its potential returns per unit of risk. Swedbank AB is currently generating about 0.01 per unit of risk. If you would invest  26,500  in TF Bank AB on September 4, 2024 and sell it today you would earn a total of  9,300  from holding TF Bank AB or generate 35.09% return on investment over 90 days.

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

TF Bank AB  vs.  Swedbank AB

TF Bank AB

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with TF Bank and Swedbank

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

The idea behind TF Bank AB and Swedbank 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.