Correlation Between Svenska Handelsbanken and National Australia

Can any of the company-specific risk be diversified away by investing in both Svenska Handelsbanken and National Australia 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 National Australia 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 National Australia Bank, you can compare the effects of market volatilities on Svenska Handelsbanken and National Australia 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 National Australia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Handelsbanken and National Australia.

Diversification Opportunities for Svenska Handelsbanken and National Australia

0.21

Correlation Coefficient

Svenska Handelsbanken  National Australia

Modest diversification

The 3 months correlation between Svenska and National is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and National Australia Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Australia Bank 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 National Australia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Australia Bank has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and National Australia go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and National Australia

Assuming the 90 days horizon Svenska Handelsbanken AB is expected to generate 1.64 times more return on investment than National Australia. However, Svenska Handelsbanken is 1.64 times more volatile than National Australia Bank. It trades about 0.03 of its potential returns per unit of risk. National Australia Bank is currently generating about 0.02 per unit of risk. If you would invest  1,049  in Svenska Handelsbanken AB on September 5, 2024 and sell it today you would earn a total of  33.00  from holding Svenska Handelsbanken AB or generate 3.15% return on investment over 90 days.

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

Svenska Handelsbanken AB  vs.  National Australia Bank

Svenska Handelsbanken

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Svenska Handelsbanken is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

National Australia Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Australia Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, National Australia is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Svenska Handelsbanken and National Australia

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

The idea behind Svenska Handelsbanken AB and National Australia Bank 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.