Correlation Between Svenska Handelsbanken and AstraZeneca PLC

Can any of the company-specific risk be diversified away by investing in both Svenska Handelsbanken and AstraZeneca PLC 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 Svenska Handelsbanken and AstraZeneca PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Svenska Handelsbanken and AstraZeneca PLC

-0.95

Correlation Coefficient

Svenska Handelsbanken  AstraZeneca PLC

Pay attention - limited upside

The 3 months correlation between Svenska and AstraZeneca is -0.95. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Handelsbanken AB and AstraZeneca PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AstraZeneca PLC and Svenska Handelsbanken 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 Svenska Handelsbanken AB are associated (or correlated) with AstraZeneca PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AstraZeneca PLC has no effect on the direction of Svenska Handelsbanken i.e., Svenska Handelsbanken and AstraZeneca PLC go up and down completely randomly.

Pair Corralation between Svenska Handelsbanken and AstraZeneca PLC

Assuming the 90 days trading horizon Svenska Handelsbanken is expected to generate 1.07 times less return on investment than AstraZeneca PLC. In addition to that, Svenska Handelsbanken is 1.01 times more volatile than AstraZeneca PLC. It trades about 0.03 of its total potential returns per unit of risk. AstraZeneca PLC is currently generating about 0.03 per unit of volatility. If you would invest  164,450  in AstraZeneca PLC on March 17, 2024 and sell it today you would earn a total of  950.00  from holding AstraZeneca PLC or generate 0.58% return on investment over 90 days.

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

Svenska Handelsbanken AB  vs.  AstraZeneca PLC

Svenska Handelsbanken

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Svenska Handelsbanken AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

AstraZeneca PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AstraZeneca PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, AstraZeneca PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Svenska Handelsbanken and AstraZeneca PLC

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

The idea behind Svenska Handelsbanken AB and AstraZeneca PLC 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.