Correlation Between Swedbank and Telia Company
Can any of the company-specific risk be diversified away by investing in both Swedbank and Telia Company 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 Swedbank and Telia Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swedbank AB and Telia Company AB, you can compare the effects of market volatilities on Swedbank and Telia Company 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 Swedbank with a short position of Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swedbank and Telia Company.
Diversification Opportunities for Swedbank and Telia Company
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Swedbank and Telia is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company and Swedbank 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 Swedbank AB are associated (or correlated) with Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Swedbank i.e., Swedbank and Telia Company go up and down completely randomly.
Pair Corralation between Swedbank and Telia Company
Assuming the 90 days trading horizon Swedbank AB is expected to under-perform the Telia Company. But the stock apears to be less risky and, when comparing its historical volatility, Swedbank AB is 1.38 times less risky than Telia Company. The stock trades about -0.15 of its potential returns per unit of risk. The Telia Company AB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,181 in Telia Company AB on August 28, 2024 and sell it today you would earn a total of 1.00 from holding Telia Company AB or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Swedbank AB vs. Telia Company AB
Performance |
| Timeline |
| Swedbank AB |
| Telia Company |
Swedbank and Telia Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swedbank and Telia Company
The main advantage of trading using opposite Swedbank and Telia Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swedbank position performs unexpectedly, Telia Company 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 Telia Company will offset losses from the drop in Telia Company's long position.| Swedbank vs. Svenska Handelsbanken AB | Swedbank vs. Nordea Bank Abp | Swedbank vs. Telia Company AB | Swedbank vs. Tele2 AB |
| Telia Company vs. Tele2 AB | Telia Company vs. Swedbank AB | Telia Company vs. Svenska Handelsbanken AB | Telia Company vs. Nordea Bank Abp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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