Correlation Between S E and Target

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Can any of the company-specific risk be diversified away by investing in both S E and Target 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 S E and Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between S E BANKEN A and Target, you can compare the effects of market volatilities on S E and Target 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 S E with a short position of Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of S E and Target.

Diversification Opportunities for S E and Target

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between SEBA and Target is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding S-E BANKEN -A- and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target and S E 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 S E BANKEN A are associated (or correlated) with Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of S E i.e., S E and Target go up and down completely randomly.

Pair Corralation between S E and Target

Assuming the 90 days trading horizon S E BANKEN A is expected to generate 1.54 times more return on investment than Target. However, S E is 1.54 times more volatile than Target. It trades about 0.23 of its potential returns per unit of risk. Target is currently generating about 0.23 per unit of risk. If you would invest  1,047  in S E BANKEN A on December 29, 2023 and sell it today you would earn a total of  256.00  from holding S E BANKEN A or generate 24.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

S-E BANKEN -A-  vs.  Target

 Performance 
       Timeline  
S-E BANKEN -A- 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in S E BANKEN A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, S E unveiled solid returns over the last few months and may actually be approaching a breakup point.
Target 

Risk-Adjusted Performance

13 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Target unveiled solid returns over the last few months and may actually be approaching a breakup point.

S E and Target Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with S E and Target

The main advantage of trading using opposite S E and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S E position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.
The idea behind S E BANKEN A and Target 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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