Correlation Between Svenska Handelsbanken and Industrial

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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

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Svenska and Industrial is -0.38. 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 is expected to generate 4.93 times less return on investment than Industrial. But when comparing it to its historical volatility, Svenska Handelsbanken PK is 4.07 times less risky than Industrial. It trades about 0.04 of its potential returns per unit of risk. Industrial and Commercial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Industrial and Commercial on September 6, 2024 and sell it today you would earn a total of  13.00  from holding Industrial and Commercial or generate 27.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy70.91%
ValuesDaily Returns

Svenska Handelsbanken PK  vs.  Industrial and Commercial

 Performance 
       Timeline  
Svenska Handelsbanken 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Handelsbanken PK are ranked lower than 4 (%) 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

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Svenska Handelsbanken and Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

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.
Check out your portfolio center.
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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