Correlation Between Industrial and Svenska Handelsbanken

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

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

Diversification Opportunities for Industrial and Svenska Handelsbanken

-0.26

Correlation Coefficient

Industrial  Svenska Handelsbanken

Very good diversification

The 3 months correlation between Industrial and Svenska is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Svenska Handelsbanken PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and Industrial 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 Industrial and Commercial 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 Industrial i.e., Industrial and Svenska Handelsbanken go up and down completely randomly.

Pair Corralation between Industrial and Svenska Handelsbanken

Assuming the 90 days horizon Industrial and Commercial is expected to generate 2.43 times more return on investment than Svenska Handelsbanken. However, Industrial is 2.43 times more volatile than Svenska Handelsbanken PK. It trades about 0.03 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  57.00  in Industrial and Commercial on September 9, 2024 and sell it today you would earn a total of  4.00  from holding Industrial and Commercial or generate 7.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Industrial and Commercial  vs.  Svenska Handelsbanken PK

Industrial and Commercial

Risk-Adjusted Performance

7 of 100

OK

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

Svenska Handelsbanken

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken PK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Svenska Handelsbanken is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial and Svenska Handelsbanken

The main advantage of trading using opposite Industrial and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.