Correlation Between Svenska Handelsbanken and Hufvudstaden

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

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

Diversification Opportunities for Svenska Handelsbanken and Hufvudstaden

-0.62

Correlation Coefficient

Svenska Handelsbanken  Hufvudstaden

Excellent diversification

The 3 months correlation between Svenska and Hufvudstaden is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and Hufvudstaden AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hufvudstaden AB and Svenska Handelsbanken 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 Svenska Handelsbanken AB are associated (or correlated) with Hufvudstaden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hufvudstaden AB has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and Hufvudstaden go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and Hufvudstaden

Assuming the 90 days trading horizon Svenska Handelsbanken AB is expected to under-perform the Hufvudstaden. In addition to that, Svenska Handelsbanken is 1.73 times more volatile than Hufvudstaden AB. It trades about -0.18 of its total potential returns per unit of risk. Hufvudstaden AB is currently generating about 0.19 per unit of volatility. If you would invest  12,430  in Hufvudstaden AB on February 4, 2024 and sell it today you would earn a total of  680.00  from holding Hufvudstaden AB or generate 5.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Svenska Handelsbanken AB  vs.  Hufvudstaden AB

Svenska Handelsbanken

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Svenska Handelsbanken AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hufvudstaden AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hufvudstaden AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hufvudstaden is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Svenska Handelsbanken and Hufvudstaden

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

The idea behind Svenska Handelsbanken AB and Hufvudstaden 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 Valuation module to check real value of public entities based on technical and fundamental data.