Correlation Between Skandinaviska Enskilda and Sandvik AB

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

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

Diversification Opportunities for Skandinaviska Enskilda and Sandvik AB

0.25

Correlation Coefficient

Skandinaviska Enskilda  Sandvik AB

Modest diversification

The 3 months correlation between Skandinaviska and Sandvik is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB and Skandinaviska Enskilda 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 Skandinaviska Enskilda Banken are associated (or correlated) with Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Sandvik AB go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Sandvik AB

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to under-perform the Sandvik AB. But the stock apears to be less risky and, when comparing its historical volatility, Skandinaviska Enskilda Banken is 1.15 times less risky than Sandvik AB. The stock trades about -0.01 of its potential returns per unit of risk. The Sandvik AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  20,630  in Sandvik AB on September 14, 2024 and sell it today you would earn a total of  340.00  from holding Sandvik AB or generate 1.65% return on investment over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Sandvik AB

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Sandvik AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sandvik AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sandvik AB 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 Skandinaviska Enskilda and Sandvik AB

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

The idea behind Skandinaviska Enskilda Banken and Sandvik 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.