Correlation Between Train Alliance and Svenska Handelsbanken

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

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

Diversification Opportunities for Train Alliance and Svenska Handelsbanken

0.34

Correlation Coefficient

Train Alliance  Svenska Handelsbanken

Weak diversification

The 3 months correlation between Train and Svenska is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Train Alliance Sweden and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and Train Alliance 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 Train Alliance Sweden 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 Train Alliance i.e., Train Alliance and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between Train Alliance and Svenska Handelsbanken

Assuming the 90 days trading horizon Train Alliance Sweden is expected to under-perform the Svenska Handelsbanken. But the stock apears to be less risky and, when comparing its historical volatility, Train Alliance Sweden is 1.01 times less risky than Svenska Handelsbanken. The stock trades about -0.02 of its potential returns per unit of risk. The Svenska Handelsbanken AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  13,320  in Svenska Handelsbanken AB on September 2, 2024 and sell it today you would earn a total of  1,250  from holding Svenska Handelsbanken AB or generate 9.38% return on investment over 90 days.

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

Train Alliance Sweden  vs.  Svenska Handelsbanken AB

Train Alliance Sweden

Risk-Adjusted Performance

0 of 100

Very Weak

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

Svenska Handelsbanken

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Svenska Handelsbanken may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Train Alliance and Svenska Handelsbanken

The main advantage of trading using opposite Train Alliance and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Train Alliance 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.

The idea behind Train Alliance Sweden and Svenska Handelsbanken 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.