Correlation Between SEB SA and IDI SCA
Can any of the company-specific risk be diversified away by investing in both SEB SA and IDI SCA 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 SEB SA and IDI SCA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEB SA and IDI SCA, you can compare the effects of market volatilities on SEB SA and IDI SCA 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 SEB SA with a short position of IDI SCA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEB SA and IDI SCA.
Diversification Opportunities for SEB SA and IDI SCA
Good diversification
The 3 months correlation between SEB and IDI is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding SEB SA and IDI SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDI SCA and SEB SA 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 SEB SA are associated (or correlated) with IDI SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDI SCA has no effect on the direction of SEB SA i.e., SEB SA and IDI SCA go up and down completely randomly.
Pair Corralation between SEB SA and IDI SCA
Assuming the 90 days horizon SEB SA is expected to generate 2.42 times less return on investment than IDI SCA. In addition to that, SEB SA is 1.4 times more volatile than IDI SCA. It trades about 0.02 of its total potential returns per unit of risk. IDI SCA is currently generating about 0.06 per unit of volatility. If you would invest 5,234 in IDI SCA on August 31, 2024 and sell it today you would earn a total of 1,526 from holding IDI SCA or generate 29.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEB SA vs. IDI SCA
Performance |
| Timeline |
| SEB SA |
| IDI SCA |
SEB SA and IDI SCA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEB SA and IDI SCA
The main advantage of trading using opposite SEB SA and IDI SCA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEB SA position performs unexpectedly, IDI SCA 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 IDI SCA will offset losses from the drop in IDI SCA's long position.The idea behind SEB SA and IDI SCA 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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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