Correlation Between Holmen AB and AB Sagax
Can any of the company-specific risk be diversified away by investing in both Holmen AB and AB Sagax 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 AB Sagax into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holmen AB and AB Sagax, you can compare the effects of market volatilities on Holmen AB and AB Sagax 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 AB Sagax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and AB Sagax.
Diversification Opportunities for Holmen AB and AB Sagax
Very poor diversification
The 3 months correlation between Holmen and SAGA-A is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and AB Sagax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Sagax 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 AB Sagax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Sagax has no effect on the direction of Holmen AB i.e., Holmen AB and AB Sagax go up and down completely randomly.
Pair Corralation between Holmen AB and AB Sagax
Assuming the 90 days trading horizon Holmen AB is expected to generate 0.64 times more return on investment than AB Sagax. However, Holmen AB is 1.57 times less risky than AB Sagax. It trades about -0.03 of its potential returns per unit of risk. AB Sagax is currently generating about -0.06 per unit of risk. If you would invest 43,000 in Holmen AB on September 3, 2024 and sell it today you would lose (2,500) from holding Holmen AB or give up 5.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Holmen AB vs. AB Sagax
Performance |
| Timeline |
| Holmen AB |
| AB Sagax |
Holmen AB and AB Sagax Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holmen AB and AB Sagax
The main advantage of trading using opposite Holmen AB and AB Sagax positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holmen AB position performs unexpectedly, AB Sagax 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 AB Sagax will offset losses from the drop in AB Sagax's long position.| Holmen AB vs. Holmen AB | Holmen AB vs. Tele2 AB | Holmen AB vs. Stora Enso Oyj | Holmen AB vs. BillerudKorsnas 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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