Correlation Between Holmen AB and STORA ENSO
Can any of the company-specific risk be diversified away by investing in both Holmen AB 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 Holmen AB and STORA ENSO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holmen AB and STORA ENSO OYJ, you can compare the effects of market volatilities on Holmen AB 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 Holmen AB with a short position of STORA ENSO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and STORA ENSO.
Diversification Opportunities for Holmen AB and STORA ENSO
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Holmen and STORA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB 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 Holmen AB 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 Holmen AB 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 Holmen AB i.e., Holmen AB and STORA ENSO go up and down completely randomly.
Pair Corralation between Holmen AB and STORA ENSO
Assuming the 90 days trading horizon Holmen AB is expected to generate 0.9 times more return on investment than STORA ENSO. However, Holmen AB is 1.12 times less risky than STORA ENSO. It trades about 0.03 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 2,848 in Holmen AB on August 27, 2024 and sell it today you would earn a total of 668.00 from holding Holmen AB or generate 23.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Holmen AB vs. STORA ENSO OYJ
Performance |
| Timeline |
| Holmen AB |
| STORA ENSO OYJ |
Holmen AB and STORA ENSO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holmen AB and STORA ENSO
The main advantage of trading using opposite Holmen AB and STORA ENSO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holmen AB 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.| Holmen AB vs. Sumitomo Rubber Industries | Holmen AB vs. APPLIED MATERIALS | Holmen AB vs. Citic Telecom International | Holmen AB vs. Chunghwa Telecom Co |
| STORA ENSO vs. UPM Kymmene Oyj | STORA ENSO vs. Stora Enso Oyj | STORA ENSO vs. Suzano SA | STORA ENSO vs. Suzano SA |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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