Correlation Between Skandinaviska Enskilda and Swedencare Publ

Can any of the company-specific risk be diversified away by investing in both Skandinaviska Enskilda and Swedencare Publ 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 Swedencare Publ 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 Swedencare publ AB, you can compare the effects of market volatilities on Skandinaviska Enskilda and Swedencare Publ 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 Swedencare Publ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and Swedencare Publ.

Diversification Opportunities for Skandinaviska Enskilda and Swedencare Publ

-0.1

Correlation Coefficient

Skandinaviska Enskilda  Swedencare Publ

Good diversification

The 3 months correlation between Skandinaviska and Swedencare is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and Swedencare publ AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedencare publ 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 Swedencare Publ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedencare publ AB has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and Swedencare Publ go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and Swedencare Publ

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to generate 0.56 times more return on investment than Swedencare Publ. However, Skandinaviska Enskilda Banken is 1.79 times less risky than Swedencare Publ. It trades about -0.04 of its potential returns per unit of risk. Swedencare publ AB is currently generating about -0.16 per unit of risk. If you would invest  15,220  in Skandinaviska Enskilda Banken on February 4, 2024 and sell it today you would lose (280.00) from holding Skandinaviska Enskilda Banken or give up 1.84% of portfolio value over 90 days.

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

Skandinaviska Enskilda Banken  vs.  Swedencare publ AB

Skandinaviska Enskilda

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Skandinaviska Enskilda Banken has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental 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.

Swedencare publ AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swedencare publ AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Swedencare Publ is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Skandinaviska Enskilda and Swedencare Publ

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

The idea behind Skandinaviska Enskilda Banken and Swedencare publ 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 Transaction History module to view history of all your transactions and understand their impact on performance.