Correlation Between Western Asset and Swedbank

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

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

Diversification Opportunities for Western Asset and Swedbank

0.81

Correlation Coefficient

Western Asset  Swedbank

Very poor diversification

The 3 months correlation between Western and Swedbank is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB and Western Asset 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 Western Asset Global 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 Western Asset i.e., Western Asset and Swedbank go up and down completely randomly.

Pair Corralation between Western Asset and Swedbank

Considering the 90-day investment horizon Western Asset Global is expected to generate 0.33 times more return on investment than Swedbank. However, Western Asset Global is 3.02 times less risky than Swedbank. It trades about -0.17 of its potential returns per unit of risk. Swedbank AB is currently generating about -0.08 per unit of risk. If you would invest  1,240  in Western Asset Global on September 5, 2024 and sell it today you would lose (66.00) from holding Western Asset Global or give up 5.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Western Asset Global  vs.  Swedbank AB

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, 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 latest unfluctuating performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Western Asset and Swedbank

The main advantage of trading using opposite Western Asset and Swedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset 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 Western Asset Global 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.