Correlation Between LIFE + and STORA ENSO

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Can any of the company-specific risk be diversified away by investing in both LIFE + and STORA ENSO 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 LIFE + and STORA ENSO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LIFE BANC SPLIT and STORA ENSO OYJ, you can compare the effects of market volatilities on LIFE + and STORA ENSO 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 LIFE + with a short position of STORA ENSO. Check out your portfolio center. Please also check ongoing floating volatility patterns of LIFE + and STORA ENSO.

Diversification Opportunities for LIFE + and STORA ENSO

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between LIFE and STORA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding LIFE BANC SPLIT and STORA ENSO OYJ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORA ENSO OYJ and LIFE + 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 LIFE BANC SPLIT are associated (or correlated) with STORA ENSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORA ENSO OYJ has no effect on the direction of LIFE + i.e., LIFE + and STORA ENSO go up and down completely randomly.

Pair Corralation between LIFE + and STORA ENSO

Assuming the 90 days horizon LIFE BANC SPLIT is expected to generate 1.44 times more return on investment than STORA ENSO. However, LIFE + is 1.44 times more volatile than STORA ENSO OYJ. It trades about 0.04 of its potential returns per unit of risk. STORA ENSO OYJ is currently generating about -0.04 per unit of risk. If you would invest  463.00  in LIFE BANC SPLIT on August 27, 2024 and sell it today you would earn a total of  167.00  from holding LIFE BANC SPLIT or generate 36.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

LIFE BANC SPLIT  vs.  STORA ENSO OYJ

 Performance 
       Timeline  
LIFE BANC SPLIT 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in LIFE BANC SPLIT are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, LIFE + reported solid returns over the last few months and may actually be approaching a breakup point.
STORA ENSO OYJ 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days STORA ENSO OYJ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

LIFE + and STORA ENSO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LIFE + and STORA ENSO

The main advantage of trading using opposite LIFE + and STORA ENSO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LIFE + position performs unexpectedly, STORA ENSO 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 STORA ENSO will offset losses from the drop in STORA ENSO's long position.
The idea behind LIFE BANC SPLIT and STORA ENSO OYJ 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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