Correlation Between Svenska Handelsbanken and Industrial

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

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

Diversification Opportunities for Svenska Handelsbanken and Industrial

-0.28

Correlation Coefficient

Svenska Handelsbanken  Industrial

Very good diversification

The 3 months correlation between Svenska and Industrial is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken PK and Industrial and Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial and Commercial 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 PK are associated (or correlated) with Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial and Commercial has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and Industrial go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and Industrial

Assuming the 90 days horizon Svenska Handelsbanken PK is expected to generate 1.44 times more return on investment than Industrial. However, Svenska Handelsbanken is 1.44 times more volatile than Industrial and Commercial. It trades about 0.15 of its potential returns per unit of risk. Industrial and Commercial is currently generating about -0.09 per unit of risk. If you would invest  510.00  in Svenska Handelsbanken PK on September 9, 2024 and sell it today you would earn a total of  18.00  from holding Svenska Handelsbanken PK or generate 3.53% return on investment over 90 days.

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

Svenska Handelsbanken PK  vs.  Industrial and Commercial

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.

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.

Pair Trading with Svenska Handelsbanken and Industrial

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

The idea behind Svenska Handelsbanken PK and Industrial and Commercial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.