Correlation Between Embassy Bancorp and Swedbank

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

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

Diversification Opportunities for Embassy Bancorp and Swedbank

-0.6

Correlation Coefficient

Embassy Bancorp  Swedbank

Excellent diversification

The 3 months correlation between Embassy and Swedbank is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Bancorp and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB and Embassy Bancorp 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 Embassy Bancorp 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 Embassy Bancorp i.e., Embassy Bancorp and Swedbank go up and down completely randomly.

Pair Corralation between Embassy Bancorp and Swedbank

Given the investment horizon of 90 days Embassy Bancorp is expected to generate 6.4 times less return on investment than Swedbank. In addition to that, Embassy Bancorp is 1.42 times more volatile than Swedbank AB. It trades about 0.0 of its total potential returns per unit of risk. Swedbank AB is currently generating about 0.04 per unit of volatility. If you would invest  1,711  in Swedbank AB on September 12, 2024 and sell it today you would earn a total of  293.00  from holding Swedbank AB or generate 17.12% return on investment over 90 days.

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

Embassy Bancorp  vs.  Swedbank AB

Embassy Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embassy Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Embassy Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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. In spite of fairly strong fundamental drivers, Swedbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embassy Bancorp and Swedbank

The main advantage of trading using opposite Embassy Bancorp and Swedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embassy Bancorp 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 Embassy Bancorp 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.