Correlation Between Svenska Cellulosa and Sandvik AB
Can any of the company-specific risk be diversified away by investing in both Svenska Cellulosa 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 Svenska Cellulosa and Sandvik AB 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 Sandvik AB, you can compare the effects of market volatilities on Svenska Cellulosa 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 Svenska Cellulosa with a short position of Sandvik AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Cellulosa and Sandvik AB.
Diversification Opportunities for Svenska Cellulosa and Sandvik AB
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Svenska and Sandvik is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget and Sandvik AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandvik AB 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 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 Svenska Cellulosa i.e., Svenska Cellulosa and Sandvik AB go up and down completely randomly.
Pair Corralation between Svenska Cellulosa and Sandvik AB
Assuming the 90 days trading horizon Svenska Cellulosa Aktiebolaget is expected to generate 0.92 times more return on investment than Sandvik AB. However, Svenska Cellulosa Aktiebolaget is 1.08 times less risky than Sandvik AB. It trades about -0.09 of its potential returns per unit of risk. Sandvik AB is currently generating about -0.21 per unit of risk. If you would invest 14,455 in Svenska Cellulosa Aktiebolaget on August 30, 2024 and sell it today you would lose (395.00) from holding Svenska Cellulosa Aktiebolaget or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Svenska Cellulosa Aktiebolaget vs. Sandvik AB
Performance |
| Timeline |
| Svenska Cellulosa |
| Sandvik AB |
Svenska Cellulosa and Sandvik AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Svenska Cellulosa and Sandvik AB
The main advantage of trading using opposite Svenska Cellulosa and Sandvik AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Svenska Cellulosa 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.| Svenska Cellulosa vs. Essity AB | Svenska Cellulosa vs. AB SKF | Svenska Cellulosa vs. Skanska AB | Svenska Cellulosa vs. Sandvik AB |
| Sandvik AB vs. AB SKF | Sandvik AB vs. Alfa Laval AB | Sandvik AB vs. Atlas Copco AB | Sandvik AB vs. Boliden 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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