Correlation Between Sandvik AB and Svenska Cellulosa
Can any of the company-specific risk be diversified away by investing in both Sandvik AB and Svenska Cellulosa 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 Sandvik AB and Svenska Cellulosa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sandvik AB and Svenska Cellulosa Aktiebolaget, you can compare the effects of market volatilities on Sandvik AB and Svenska Cellulosa 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 Sandvik AB with a short position of Svenska Cellulosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandvik AB and Svenska Cellulosa.
Diversification Opportunities for Sandvik AB and Svenska Cellulosa
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sandvik and Svenska is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sandvik AB and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and Sandvik 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 Sandvik AB are associated (or correlated) with Svenska Cellulosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Cellulosa has no effect on the direction of Sandvik AB i.e., Sandvik AB and Svenska Cellulosa go up and down completely randomly.
Pair Corralation between Sandvik AB and Svenska Cellulosa
Assuming the 90 days trading horizon Sandvik AB is expected to generate 1.31 times more return on investment than Svenska Cellulosa. However, Sandvik AB is 1.31 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about -0.12 of its potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about -0.19 per unit of risk. If you would invest 21,100 in Sandvik AB on August 26, 2024 and sell it today you would lose (840.00) from holding Sandvik AB or give up 3.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sandvik AB vs. Svenska Cellulosa Aktiebolaget
Performance |
| Timeline |
| Sandvik AB |
| Svenska Cellulosa |
Sandvik AB and Svenska Cellulosa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sandvik AB and Svenska Cellulosa
The main advantage of trading using opposite Sandvik AB and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandvik AB position performs unexpectedly, Svenska Cellulosa 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 Svenska Cellulosa will offset losses from the drop in Svenska Cellulosa's long position.| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden AB |
| Svenska Cellulosa vs. Essity AB | Svenska Cellulosa vs. AB SKF | Svenska Cellulosa vs. Skanska AB | Svenska Cellulosa vs. Sandvik 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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