Correlation Between Skandinaviska Enskilda and BHP Group
Can any of the company-specific risk be diversified away by investing in both Skandinaviska Enskilda and BHP 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 Skandinaviska Enskilda and BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on Skandinaviska Enskilda and BHP 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 Skandinaviska Enskilda with a short position of BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and BHP Group.
Diversification Opportunities for Skandinaviska Enskilda and BHP Group
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Skandinaviska and BHP is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and BHP Group go up and down completely randomly.
Pair Corralation between Skandinaviska Enskilda and BHP Group
Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to generate 0.64 times more return on investment than BHP Group. However, Skandinaviska Enskilda Banken is 1.56 times less risky than BHP Group. It trades about -0.08 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.12 per unit of risk. If you would invest 15,600 in Skandinaviska Enskilda Banken on September 2, 2024 and sell it today you would lose (260.00) from holding Skandinaviska Enskilda Banken or give up 1.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Skandinaviska Enskilda Banken vs. BHP Group Limited
Performance |
| Timeline |
| Skandinaviska Enskilda |
| BHP Group Limited |
Skandinaviska Enskilda and BHP Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Skandinaviska Enskilda and BHP Group
The main advantage of trading using opposite Skandinaviska Enskilda and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skandinaviska Enskilda position performs unexpectedly, BHP 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 BHP Group will offset losses from the drop in BHP Group's long position.The idea behind Skandinaviska Enskilda Banken and BHP Group Limited 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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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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