Correlation Between Swedbank and TF Bank

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

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

Diversification Opportunities for Swedbank and TF Bank

0.26

Correlation Coefficient

Swedbank  TF Bank

Modest diversification

The 3 months correlation between Swedbank and TFBANK is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and TF Bank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TF Bank AB 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 TF Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TF Bank AB has no effect on the direction of Swedbank i.e., Swedbank and TF Bank go up and down completely randomly.

Pair Corralation between Swedbank and TF Bank

Assuming the 90 days trading horizon Swedbank is expected to generate 21.88 times less return on investment than TF Bank. But when comparing it to its historical volatility, Swedbank AB is 1.73 times less risky than TF Bank. It trades about 0.02 of its potential returns per unit of risk. TF Bank AB is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  26,500  in TF Bank AB on September 13, 2024 and sell it today you would earn a total of  8,800  from holding TF Bank AB or generate 33.21% return on investment over 90 days.

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

Swedbank AB  vs.  TF Bank AB

Swedbank AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Swedbank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

TF Bank AB

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TF Bank AB are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, TF Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swedbank and TF Bank

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

The idea behind Swedbank AB and TF Bank AB 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.