Correlation Between Swedbank and Embassy Bancorp

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

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

Diversification Opportunities for Swedbank and Embassy Bancorp

-0.68

Correlation Coefficient

Swedbank  Embassy Bancorp

Excellent diversification

The 3 months correlation between Swedbank and Embassy is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Embassy Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy Bancorp and Swedbank 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 Swedbank AB are associated (or correlated) with Embassy Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Bancorp has no effect on the direction of Swedbank i.e., Swedbank and Embassy Bancorp go up and down completely randomly.

Pair Corralation between Swedbank and Embassy Bancorp

Assuming the 90 days horizon Swedbank AB is expected to under-perform the Embassy Bancorp. In addition to that, Swedbank is 2.86 times more volatile than Embassy Bancorp. It trades about -0.06 of its total potential returns per unit of risk. Embassy Bancorp is currently generating about 0.18 per unit of volatility. If you would invest  1,550  in Embassy Bancorp on September 4, 2024 and sell it today you would earn a total of  95.00  from holding Embassy Bancorp or generate 6.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Swedbank AB  vs.  Embassy Bancorp

Swedbank AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedbank AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Swedbank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Embassy Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embassy Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Embassy Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Swedbank and Embassy Bancorp

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

The idea behind Swedbank AB and Embassy Bancorp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.