Correlation Between Barclays PLC and Svenska Handelsbanken

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

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

Diversification Opportunities for Barclays PLC and Svenska Handelsbanken

0.24

Correlation Coefficient

Barclays PLC  Svenska Handelsbanken

Modest diversification

The 3 months correlation between Barclays and Svenska is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC and Svenska Handelsbanken PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and Barclays PLC 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 Barclays PLC 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 Barclays PLC i.e., Barclays PLC and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between Barclays PLC and Svenska Handelsbanken

Assuming the 90 days horizon Barclays PLC is expected to generate 1.93 times more return on investment than Svenska Handelsbanken. However, Barclays PLC is 1.93 times more volatile than Svenska Handelsbanken PK. It trades about 0.1 of its potential returns per unit of risk. Svenska Handelsbanken PK is currently generating about 0.07 per unit of risk. If you would invest  290.00  in Barclays PLC on September 11, 2024 and sell it today you would earn a total of  47.00  from holding Barclays PLC or generate 16.21% return on investment over 90 days.

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

Barclays PLC  vs.  Svenska Handelsbanken PK

Barclays PLC

Risk-Adjusted Performance

7 of 100

OK

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

Svenska Handelsbanken

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken PK are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, Svenska Handelsbanken may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Barclays PLC and Svenska Handelsbanken

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

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.