Correlation Between Commerzbank and Swedbank
Can any of the company-specific risk be diversified away by investing in both Commerzbank and Swedbank 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 Commerzbank and Swedbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commerzbank AG PK and Swedbank AB, you can compare the effects of market volatilities on Commerzbank and Swedbank 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 Commerzbank with a short position of Swedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and Swedbank.
Diversification Opportunities for Commerzbank and Swedbank
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Commerzbank and Swedbank is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG PK and Swedbank AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swedbank AB and Commerzbank 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 Commerzbank AG PK are associated (or correlated) with Swedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swedbank AB has no effect on the direction of Commerzbank i.e., Commerzbank and Swedbank go up and down completely randomly.
Pair Corralation between Commerzbank and Swedbank
Assuming the 90 days horizon Commerzbank AG PK is expected to under-perform the Swedbank. In addition to that, Commerzbank is 1.22 times more volatile than Swedbank AB. It trades about -0.25 of its total potential returns per unit of risk. Swedbank AB is currently generating about -0.2 per unit of volatility. If you would invest 2,054 in Swedbank AB on August 27, 2024 and sell it today you would lose (124.00) from holding Swedbank AB or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commerzbank AG PK vs. Swedbank AB
Performance |
| Timeline |
| Commerzbank AG PK |
| Swedbank AB |
Commerzbank and Swedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commerzbank and Swedbank
The main advantage of trading using opposite Commerzbank and Swedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commerzbank position performs unexpectedly, Swedbank 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 Swedbank will offset losses from the drop in Swedbank's long position.The idea behind Commerzbank AG PK and Swedbank 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.| Swedbank vs. United Overseas Bank | Swedbank vs. KBC Groep NV | Swedbank vs. Jyske Bank AS | Swedbank vs. Israel Discount Bank |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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