Correlation Between Swedbank and AB Volvo
Can any of the company-specific risk be diversified away by investing in both Swedbank and AB Volvo 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 AB Volvo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Swedbank AB and AB Volvo, you can compare the effects of market volatilities on Swedbank and AB Volvo 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 AB Volvo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swedbank and AB Volvo.
Diversification Opportunities for Swedbank and AB Volvo
Good diversification
The 3 months correlation between Swedbank and VOLV-B is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Swedbank AB and AB Volvo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Volvo 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 AB Volvo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Volvo has no effect on the direction of Swedbank i.e., Swedbank and AB Volvo go up and down completely randomly.
Pair Corralation between Swedbank and AB Volvo
Assuming the 90 days trading horizon Swedbank AB is expected to generate 0.71 times more return on investment than AB Volvo. However, Swedbank AB is 1.4 times less risky than AB Volvo. It trades about -0.17 of its potential returns per unit of risk. AB Volvo is currently generating about -0.12 per unit of risk. If you would invest 21,820 in Swedbank AB on August 29, 2024 and sell it today you would lose (880.00) from holding Swedbank AB or give up 4.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Swedbank AB vs. AB Volvo
Performance |
| Timeline |
| Swedbank AB |
| AB Volvo |
Swedbank and AB Volvo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Swedbank and AB Volvo
The main advantage of trading using opposite Swedbank and AB Volvo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swedbank position performs unexpectedly, AB Volvo 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 AB Volvo will offset losses from the drop in AB Volvo's long position.| Swedbank vs. Svenska Handelsbanken AB | Swedbank vs. Nordea Bank Abp | Swedbank vs. Telia Company AB | Swedbank vs. Tele2 AB |
| AB Volvo vs. AstraZeneca PLC | AB Volvo vs. H M Hennes | AB Volvo vs. Telefonaktiebolaget LM Ericsson | AB Volvo vs. Investor AB ser |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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