Correlation Between Skandinaviska Enskilda and Swedbank

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

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

Diversification Opportunities for Skandinaviska Enskilda and Swedbank

0.69

Correlation Coefficient

Skandinaviska Enskilda  Swedbank

Poor diversification

The 3 months correlation between Skandinaviska and Swedbank is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB and Skandinaviska Enskilda 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 Skandinaviska Enskilda Banken are associated (or correlated) with Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Swedbank go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Swedbank

Assuming the 90 days trading horizon Skandinaviska Enskilda is expected to generate 1.04 times less return on investment than Swedbank. In addition to that, Skandinaviska Enskilda is 1.02 times more volatile than Swedbank AB. It trades about 0.04 of its total potential returns per unit of risk. Swedbank AB is currently generating about 0.05 per unit of volatility. If you would invest  20,762  in Swedbank AB on February 26, 2024 and sell it today you would earn a total of  748.00  from holding Swedbank AB or generate 3.6% return on investment over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Swedbank AB

Skandinaviska Enskilda

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Skandinaviska Enskilda is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Swedbank AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Swedbank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Skandinaviska Enskilda and Swedbank

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

The idea behind Skandinaviska Enskilda Banken and Swedbank 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.