Correlation Between Fagerhult and Skandinaviska Enskilda

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

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

Diversification Opportunities for Fagerhult and Skandinaviska Enskilda

0.53

Correlation Coefficient

Fagerhult  Skandinaviska Enskilda

Very weak diversification

The 3 months correlation between Fagerhult and Skandinaviska is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fagerhult AB and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda and Fagerhult 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 Fagerhult AB are associated (or correlated) with Skandinaviska Enskilda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skandinaviska Enskilda has no effect on the direction of Fagerhult i.e., Fagerhult and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between Fagerhult and Skandinaviska Enskilda

Assuming the 90 days trading horizon Fagerhult AB is expected to under-perform the Skandinaviska Enskilda. In addition to that, Fagerhult is 1.05 times more volatile than Skandinaviska Enskilda Banken. It trades about -0.14 of its total potential returns per unit of risk. Skandinaviska Enskilda Banken is currently generating about -0.03 per unit of volatility. If you would invest  16,060  in Skandinaviska Enskilda Banken on September 13, 2024 and sell it today you would lose (400.00) from holding Skandinaviska Enskilda Banken or give up 2.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Fagerhult AB  vs.  Skandinaviska Enskilda Banken

Fagerhult AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fagerhult AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Skandinaviska Enskilda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skandinaviska Enskilda Banken has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Skandinaviska Enskilda is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fagerhult and Skandinaviska Enskilda

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

The idea behind Fagerhult AB and Skandinaviska Enskilda Banken 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.