Correlation Between Swedbank and ADDvise Group

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

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

Diversification Opportunities for Swedbank and ADDvise Group

-0.85

Correlation Coefficient

Swedbank  ADDvise Group

Pay attention - limited upside

The 3 months correlation between Swedbank and ADDvise is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and ADDvise Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADDvise Group 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 ADDvise Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADDvise Group AB has no effect on the direction of Swedbank i.e., Swedbank and ADDvise Group go up and down completely randomly.

Pair Corralation between Swedbank and ADDvise Group

Assuming the 90 days trading horizon Swedbank AB is expected to under-perform the ADDvise Group. But the stock apears to be less risky and, when comparing its historical volatility, Swedbank AB is 1.05 times less risky than ADDvise Group. The stock trades about -0.06 of its potential returns per unit of risk. The ADDvise Group AB is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,340  in ADDvise Group AB on February 5, 2024 and sell it today you would earn a total of  35.00  from holding ADDvise Group AB or generate 2.61% return on investment over 90 days.

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

Swedbank AB  vs.  ADDvise Group AB

Swedbank AB

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Swedbank AB are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Swedbank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ADDvise Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADDvise Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Swedbank and ADDvise Group

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

The idea behind Swedbank AB and ADDvise Group 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.