Correlation Between Dow Jones and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Stora Enso Oyj, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Stora Enso.
Diversification Opportunities for Dow Jones and Stora Enso
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Stora is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Stora Enso go up and down completely randomly.
Pair Corralation between Dow Jones and Stora Enso
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.41 times more return on investment than Stora Enso. However, Dow Jones Industrial is 2.46 times less risky than Stora Enso. It trades about 0.08 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.03 per unit of risk. If you would invest 3,410,864 in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of 1,080,201 from holding Dow Jones Industrial or generate 31.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Dow Jones Industrial vs. Stora Enso Oyj
Performance |
| Timeline |
Dow Jones and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Stora Enso Oyj
Pair trading matchups for Stora Enso
Pair Trading with Dow Jones and Stora Enso
The main advantage of trading using opposite Dow Jones and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| Stora Enso vs. Svenska Cellulosa Aktiebolaget | Stora Enso vs. Holmen AB | Stora Enso vs. AB SKF | Stora Enso vs. Trelleborg AB |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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