Correlation Between Skandinaviska Enskilda and Micro Systemation

Can any of the company-specific risk be diversified away by investing in both Skandinaviska Enskilda and Micro Systemation 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 Micro Systemation 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 Micro Systemation AB, you can compare the effects of market volatilities on Skandinaviska Enskilda and Micro Systemation 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 Micro Systemation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and Micro Systemation.

Diversification Opportunities for Skandinaviska Enskilda and Micro Systemation

-0.5

Correlation Coefficient

Skandinaviska Enskilda  Micro Systemation

Very good diversification

The 3 months correlation between Skandinaviska and Micro is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Micro Systemation AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Micro Systemation 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 Micro Systemation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Micro Systemation has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Micro Systemation go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Micro Systemation

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to generate 0.62 times more return on investment than Micro Systemation. However, Skandinaviska Enskilda Banken is 1.61 times less risky than Micro Systemation. It trades about -0.04 of its potential returns per unit of risk. Micro Systemation AB is currently generating about -0.04 per unit of risk. If you would invest  15,440  in Skandinaviska Enskilda Banken on August 31, 2024 and sell it today you would lose (180.00) from holding Skandinaviska Enskilda Banken or give up 1.17% of portfolio value over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Micro Systemation 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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Micro Systemation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Micro Systemation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Skandinaviska Enskilda and Micro Systemation

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

The idea behind Skandinaviska Enskilda Banken and Micro Systemation 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.