Correlation Between Holmen AB and Sappi
Can any of the company-specific risk be diversified away by investing in both Holmen AB and Sappi 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 Sappi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holmen AB ADR and Sappi Ltd ADR, you can compare the effects of market volatilities on Holmen AB and Sappi 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 Sappi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and Sappi.
Diversification Opportunities for Holmen AB and Sappi
Very good diversification
The 3 months correlation between Holmen and Sappi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB ADR and Sappi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sappi Ltd ADR 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 ADR are associated (or correlated) with Sappi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sappi Ltd ADR has no effect on the direction of Holmen AB i.e., Holmen AB and Sappi go up and down completely randomly.
Pair Corralation between Holmen AB and Sappi
Assuming the 90 days horizon Holmen AB is expected to generate 12.51 times less return on investment than Sappi. But when comparing it to its historical volatility, Holmen AB ADR is 4.54 times less risky than Sappi. It trades about 0.03 of its potential returns per unit of risk. Sappi Ltd ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 268.00 in Sappi Ltd ADR on August 25, 2024 and sell it today you would earn a total of 33.00 from holding Sappi Ltd ADR or generate 12.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 9.07% |
| Values | Daily Returns |
Holmen AB ADR vs. Sappi Ltd ADR
Performance |
| Timeline |
| Holmen AB ADR |
| Sappi Ltd ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Holmen AB and Sappi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holmen AB and Sappi
The main advantage of trading using opposite Holmen AB and Sappi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holmen AB position performs unexpectedly, Sappi 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 Sappi will offset losses from the drop in Sappi's long position.| Holmen AB vs. Mondi PLC ADR | Holmen AB vs. Canfor Pulp Products | Holmen AB vs. Nine Dragons Paper | Holmen AB vs. Sylvamo Corp |
| Sappi vs. Nine Dragons Paper | Sappi vs. Nine Dragons Paper | Sappi vs. Mondi PLC ADR | Sappi vs. Klabin Sa A |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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