Correlation Between Skandinaviska Enskilda and ALM Equity

Can any of the company-specific risk be diversified away by investing in both Skandinaviska Enskilda and ALM Equity 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 Skandinaviska Enskilda and ALM Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Skandinaviska Enskilda Banken and ALM Equity AB, you can compare the effects of market volatilities on Skandinaviska Enskilda and ALM Equity 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 Skandinaviska Enskilda with a short position of ALM Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Skandinaviska Enskilda and ALM Equity.

Diversification Opportunities for Skandinaviska Enskilda and ALM Equity

0.7

Correlation Coefficient

Skandinaviska Enskilda  ALM Equity

Poor diversification

The 3 months correlation between Skandinaviska and ALM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Skandinaviska Enskilda Banken and ALM Equity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALM Equity AB and Skandinaviska Enskilda 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 Skandinaviska Enskilda Banken are associated (or correlated) with ALM Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALM Equity AB has no effect on the direction of Skandinaviska Enskilda i.e., Skandinaviska Enskilda and ALM Equity go up and down completely randomly.

Pair Corralation between Skandinaviska Enskilda and ALM Equity

Assuming the 90 days trading horizon Skandinaviska Enskilda Banken is expected to generate 2.02 times more return on investment than ALM Equity. However, Skandinaviska Enskilda is 2.02 times more volatile than ALM Equity AB. It trades about 0.14 of its potential returns per unit of risk. ALM Equity AB is currently generating about 0.15 per unit of risk. If you would invest  15,780  in Skandinaviska Enskilda Banken on April 25, 2025 and sell it today you would earn a total of  1,500  from holding Skandinaviska Enskilda Banken or generate 9.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Skandinaviska Enskilda Banken  vs.  ALM Equity AB

Skandinaviska Enskilda

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skandinaviska Enskilda Banken are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Skandinaviska Enskilda may actually be approaching a critical reversion point that can send shares even higher in August 2025.

ALM Equity AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ALM Equity AB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ALM Equity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Skandinaviska Enskilda and ALM Equity

The main advantage of trading using opposite Skandinaviska Enskilda and ALM Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skandinaviska Enskilda position performs unexpectedly, ALM Equity 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 ALM Equity will offset losses from the drop in ALM Equity's long position.

The idea behind Skandinaviska Enskilda Banken and ALM Equity AB 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.

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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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.