Correlation Between Stora Enso and POWER METALS
Can any of the company-specific risk be diversified away by investing in both Stora Enso and POWER METALS 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 Stora Enso and POWER METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stora Enso Oyj and POWER METALS, you can compare the effects of market volatilities on Stora Enso and POWER METALS 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 Stora Enso with a short position of POWER METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stora Enso and POWER METALS.
Diversification Opportunities for Stora Enso and POWER METALS
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Stora and POWER is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS and Stora Enso 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 Stora Enso Oyj are associated (or correlated) with POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of Stora Enso i.e., Stora Enso and POWER METALS go up and down completely randomly.
Pair Corralation between Stora Enso and POWER METALS
Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the POWER METALS. But the stock apears to be less risky and, when comparing its historical volatility, Stora Enso Oyj is 2.26 times less risky than POWER METALS. The stock trades about -0.14 of its potential returns per unit of risk. The POWER METALS is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 20.00 in POWER METALS on September 2, 2024 and sell it today you would earn a total of 3.00 from holding POWER METALS or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stora Enso Oyj vs. POWER METALS
Performance |
| Timeline |
| Stora Enso Oyj |
| POWER METALS |
Stora Enso and POWER METALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stora Enso and POWER METALS
The main advantage of trading using opposite Stora Enso and POWER METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso position performs unexpectedly, POWER METALS 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 POWER METALS will offset losses from the drop in POWER METALS's long position.| Stora Enso vs. DXC Technology Co | Stora Enso vs. ONWARD MEDICAL BV | Stora Enso vs. X FAB Silicon Foundries | Stora Enso vs. Wayside Technology Group |
| POWER METALS vs. SIVERS SEMICONDUCTORS AB | POWER METALS vs. Darden Restaurants | POWER METALS vs. Reliance Steel Aluminum | POWER METALS vs. Q2M Managementberatung AG |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |