Correlation Between Dow Jones and Svenska Handelsbanken
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Svenska Handelsbanken 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 Dow Jones and Svenska Handelsbanken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Svenska Handelsbanken AB, you can compare the effects of market volatilities on Dow Jones and Svenska Handelsbanken 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 Dow Jones with a short position of Svenska Handelsbanken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Svenska Handelsbanken.
Diversification Opportunities for Dow Jones and Svenska Handelsbanken
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Svenska is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Svenska Handelsbanken AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Handelsbanken and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Svenska Handelsbanken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Handelsbanken has no effect on the direction of Dow Jones i.e., Dow Jones and Svenska Handelsbanken go up and down completely randomly.
Pair Corralation between Dow Jones and Svenska Handelsbanken
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.08 times more return on investment than Svenska Handelsbanken. However, Dow Jones is 1.08 times more volatile than Svenska Handelsbanken AB. It trades about 0.29 of its potential returns per unit of risk. Svenska Handelsbanken AB is currently generating about 0.11 per unit of risk. If you would invest 4,214,154 in Dow Jones Industrial on August 31, 2024 and sell it today you would earn a total of 258,052 from holding Dow Jones Industrial or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Dow Jones Industrial vs. Svenska Handelsbanken AB
Performance |
| Timeline |
Dow Jones and Svenska Handelsbanken Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Svenska Handelsbanken AB
Pair trading matchups for Svenska Handelsbanken
Pair Trading with Dow Jones and Svenska Handelsbanken
The main advantage of trading using opposite Dow Jones and Svenska Handelsbanken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Svenska Handelsbanken 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 Svenska Handelsbanken will offset losses from the drop in Svenska Handelsbanken's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Svenska Handelsbanken vs. Swedbank AB | Svenska Handelsbanken vs. Nordea Bank Abp | Svenska Handelsbanken vs. Tele2 AB | Svenska Handelsbanken vs. Telia Company AB |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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