Correlation Between Alphabet and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Inc Class C and Stora Enso Oyj, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Stora Enso.
Diversification Opportunities for Alphabet and Stora Enso
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alphabet and Stora is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Stora Enso go up and down completely randomly.
Pair Corralation between Alphabet and Stora Enso
Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 1.37 times more return on investment than Stora Enso. However, Alphabet is 1.37 times more volatile than Stora Enso Oyj. It trades about 0.01 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.44 per unit of risk. If you would invest 17,068 in Alphabet Inc Class C on September 3, 2024 and sell it today you would lose (19.00) from holding Alphabet Inc Class C or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Alphabet Inc Class C vs. Stora Enso Oyj
Performance |
| Timeline |
| Alphabet Class C |
| Stora Enso Oyj |
Alphabet and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphabet and Stora Enso
The main advantage of trading using opposite Alphabet and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C 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.| 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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