Correlation Between Svenska Handelsbanken and Nordea Bank
Can any of the company-specific risk be diversified away by investing in both Svenska Handelsbanken and Nordea Bank 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 Svenska Handelsbanken and Nordea Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Svenska Handelsbanken AB and Nordea Bank Abp, you can compare the effects of market volatilities on Svenska Handelsbanken and Nordea Bank 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 Svenska Handelsbanken with a short position of Nordea Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Handelsbanken and Nordea Bank.
Diversification Opportunities for Svenska Handelsbanken and Nordea Bank
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Svenska and Nordea is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp and Svenska Handelsbanken 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 Svenska Handelsbanken AB are associated (or correlated) with Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and Nordea Bank go up and down completely randomly.
Pair Corralation between Svenska Handelsbanken and Nordea Bank
Assuming the 90 days trading horizon Svenska Handelsbanken AB is expected to generate 1.34 times more return on investment than Nordea Bank. However, Svenska Handelsbanken is 1.34 times more volatile than Nordea Bank Abp. It trades about 0.06 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.04 per unit of risk. If you would invest 8,743 in Svenska Handelsbanken AB on August 26, 2024 and sell it today you would earn a total of 2,337 from holding Svenska Handelsbanken AB or generate 26.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Svenska Handelsbanken AB vs. Nordea Bank Abp
Performance |
| Timeline |
| Svenska Handelsbanken |
| Nordea Bank Abp |
Svenska Handelsbanken and Nordea Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Svenska Handelsbanken and Nordea Bank
The main advantage of trading using opposite Svenska Handelsbanken and Nordea Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Svenska Handelsbanken position performs unexpectedly, Nordea Bank 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 Nordea Bank will offset losses from the drop in Nordea Bank's long position.| Svenska Handelsbanken vs. Swedbank AB | Svenska Handelsbanken vs. Nordea Bank Abp | Svenska Handelsbanken vs. Tele2 AB | Svenska Handelsbanken vs. Telia Company AB |
| Nordea Bank vs. Skandinaviska Enskilda Banken | Nordea Bank vs. Skandinaviska Enskilda Banken | Nordea Bank vs. Swedbank AB | Nordea Bank vs. TF Bank 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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