Correlation Between Metsa Board and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Metsa Board 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 Metsa Board and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metsa Board Oyj and Stora Enso Oyj, you can compare the effects of market volatilities on Metsa Board 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 Metsa Board with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metsa Board and Stora Enso.
Diversification Opportunities for Metsa Board and Stora Enso
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Metsa and Stora is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Metsa Board Oyj 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 Metsa Board 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 Metsa Board Oyj 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 Metsa Board i.e., Metsa Board and Stora Enso go up and down completely randomly.
Pair Corralation between Metsa Board and Stora Enso
Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the Stora Enso. But the stock apears to be less risky and, when comparing its historical volatility, Metsa Board Oyj is 1.27 times less risky than Stora Enso. The stock trades about -0.57 of its potential returns per unit of risk. The Stora Enso Oyj is currently generating about -0.35 of returns per unit of risk over similar time horizon. If you would invest 1,075 in Stora Enso Oyj on August 27, 2024 and sell it today you would lose (139.00) from holding Stora Enso Oyj or give up 12.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metsa Board Oyj vs. Stora Enso Oyj
Performance |
| Timeline |
| Metsa Board Oyj |
| Stora Enso Oyj |
Metsa Board and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metsa Board and Stora Enso
The main advantage of trading using opposite Metsa Board and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metsa Board 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 Metsa Board Oyj 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. Stora Enso Oyj | Stora Enso vs. UPM Kymmene Oyj | Stora Enso vs. Huhtamaki Oyj | Stora Enso vs. Orion Oyj 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |