Correlation Between Svenska Handelsbanken and Investor

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

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

Diversification Opportunities for Svenska Handelsbanken and Investor

-0.43

Correlation Coefficient

Svenska Handelsbanken  Investor

Very good diversification

The 3 months correlation between Svenska and Investor is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and Investor AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investor AB ser and Svenska Handelsbanken 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 Svenska Handelsbanken AB are associated (or correlated) with Investor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investor AB ser has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and Investor go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and Investor

Assuming the 90 days trading horizon Svenska Handelsbanken AB is expected to generate 1.58 times more return on investment than Investor. However, Svenska Handelsbanken is 1.58 times more volatile than Investor AB ser. It trades about 0.08 of its potential returns per unit of risk. Investor AB ser is currently generating about -0.04 per unit of risk. If you would invest  10,645  in Svenska Handelsbanken AB on August 31, 2024 and sell it today you would earn a total of  735.00  from holding Svenska Handelsbanken AB or generate 6.9% return on investment over 90 days.

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

Svenska Handelsbanken AB  vs.  Investor AB ser

Svenska Handelsbanken

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Svenska Handelsbanken may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Investor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Svenska Handelsbanken and Investor

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

The idea behind Svenska Handelsbanken AB and Investor AB ser 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.