Correlation Between Holmen AB and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Holmen AB and Sandvik AB 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 Sandvik AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Holmen AB and Sandvik AB, you can compare the effects of market volatilities on Holmen AB and Sandvik AB 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 Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and Sandvik AB.
Diversification Opportunities for Holmen AB and Sandvik AB
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Holmen and Sandvik is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB 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 Sandvik AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandvik AB has no effect on the direction of Holmen AB i.e., Holmen AB and Sandvik AB go up and down completely randomly.
Pair Corralation between Holmen AB and Sandvik AB
Assuming the 90 days trading horizon Holmen AB is expected to generate 0.66 times more return on investment than Sandvik AB. However, Holmen AB is 1.52 times less risky than Sandvik AB. It trades about -0.19 of its potential returns per unit of risk. Sandvik AB is currently generating about -0.17 per unit of risk. If you would invest 42,060 in Holmen AB on August 31, 2024 and sell it today you would lose (1,600) from holding Holmen AB or give up 3.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Holmen AB vs. Sandvik AB
Performance |
| Timeline |
| Holmen AB |
| Sandvik AB |
Holmen AB and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Holmen AB and Sandvik AB
The main advantage of trading using opposite Holmen AB and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holmen AB position performs unexpectedly, Sandvik AB 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 Sandvik AB will offset losses from the drop in Sandvik AB's long position.| Holmen AB vs. Svenska Cellulosa Aktiebolaget | Holmen AB vs. BillerudKorsnas AB | Holmen AB vs. Boliden AB | Holmen AB vs. Husqvarna AB |
| Sandvik AB vs. Samhllsbyggnadsbolaget i Norden | Sandvik AB vs. Sinch AB | Sandvik AB vs. Embracer Group AB | Sandvik AB vs. Evolution 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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