Correlation Between Skanska AB and Skandinaviska Enskilda

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

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

Diversification Opportunities for Skanska AB and Skandinaviska Enskilda

-0.12

Correlation Coefficient

Skanska AB  Skandinaviska Enskilda

Good diversification

The 3 months correlation between Skanska and Skandinaviska is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Skanska AB and Skandinaviska Enskilda Banken in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skandinaviska Enskilda and Skanska AB 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 Skanska AB are associated (or correlated) with Skandinaviska Enskilda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skandinaviska Enskilda has no effect on the direction of Skanska AB i.e., Skanska AB and Skandinaviska Enskilda go up and down completely randomly.

Pair Corralation between Skanska AB and Skandinaviska Enskilda

Assuming the 90 days trading horizon Skanska AB is expected to generate 1.03 times more return on investment than Skandinaviska Enskilda. However, Skanska AB is 1.03 times more volatile than Skandinaviska Enskilda Banken. It trades about 0.16 of its potential returns per unit of risk. Skandinaviska Enskilda Banken is currently generating about -0.11 per unit of risk. If you would invest  18,199  in Skanska AB on February 2, 2024 and sell it today you would earn a total of  986.00  from holding Skanska AB or generate 5.42% return on investment over 90 days.

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

Skanska AB  vs.  Skandinaviska Enskilda Banken

Skanska AB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skanska AB are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Skanska AB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Skandinaviska Enskilda

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skandinaviska Enskilda Banken has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Skandinaviska Enskilda is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Skanska AB and Skandinaviska Enskilda

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

The idea behind Skanska AB and Skandinaviska Enskilda Banken 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.