Correlation Between Swedbank and Hitech Development

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

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

Diversification Opportunities for Swedbank and Hitech Development

-0.71

Correlation Coefficient

Swedbank  Hitech Development

Pay attention - limited upside

The 3 months correlation between Swedbank and Hitech is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Hitech Development Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitech Development 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 Hitech Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitech Development has no effect on the direction of Swedbank i.e., Swedbank and Hitech Development go up and down completely randomly.

Pair Corralation between Swedbank and Hitech Development

Assuming the 90 days trading horizon Swedbank AB is expected to generate 0.36 times more return on investment than Hitech Development. However, Swedbank AB is 2.79 times less risky than Hitech Development. It trades about 0.0 of its potential returns per unit of risk. Hitech Development Wireless is currently generating about -0.5 per unit of risk. If you would invest  21,330  in Swedbank AB on February 2, 2024 and sell it today you would lose (90.00) from holding Swedbank AB or give up 0.42% of portfolio value over 90 days.

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

Swedbank AB  vs.  Hitech Development Wireless

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 uncertain basic indicators, Swedbank may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Hitech Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hitech Development Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Swedbank and Hitech Development

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

The idea behind Swedbank AB and Hitech Development Wireless 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.