Correlation Between Svenska Cellulosa and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Svenska Cellulosa 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 Svenska Cellulosa and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Svenska Cellulosa Aktiebolaget and Stora Enso Oyj, you can compare the effects of market volatilities on Svenska Cellulosa 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 Svenska Cellulosa with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Cellulosa and Stora Enso.
Diversification Opportunities for Svenska Cellulosa and Stora Enso
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Svenska and Stora is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget 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 Svenska Cellulosa 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 Svenska Cellulosa Aktiebolaget 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 Svenska Cellulosa i.e., Svenska Cellulosa and Stora Enso go up and down completely randomly.
Pair Corralation between Svenska Cellulosa and Stora Enso
Assuming the 90 days trading horizon Svenska Cellulosa Aktiebolaget is expected to generate 0.84 times more return on investment than Stora Enso. However, Svenska Cellulosa Aktiebolaget is 1.19 times less risky than Stora Enso. It trades about 0.01 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.04 per unit of risk. If you would invest 14,117 in Svenska Cellulosa Aktiebolaget on August 26, 2024 and sell it today you would earn a total of 63.00 from holding Svenska Cellulosa Aktiebolaget or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Svenska Cellulosa Aktiebolaget vs. Stora Enso Oyj
Performance |
| Timeline |
| Svenska Cellulosa |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Stora Enso Oyj |
Svenska Cellulosa and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Svenska Cellulosa and Stora Enso
The main advantage of trading using opposite Svenska Cellulosa and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Svenska Cellulosa 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 Svenska Cellulosa Aktiebolaget 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.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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