Correlation Between Svenska Cellulosa and AB SKF
Can any of the company-specific risk be diversified away by investing in both Svenska Cellulosa and AB SKF 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 AB SKF 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 AB SKF, you can compare the effects of market volatilities on Svenska Cellulosa and AB SKF 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 AB SKF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Cellulosa and AB SKF.
Diversification Opportunities for Svenska Cellulosa and AB SKF
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Svenska and SKF-A is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget and AB SKF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB SKF 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 AB SKF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB SKF has no effect on the direction of Svenska Cellulosa i.e., Svenska Cellulosa and AB SKF go up and down completely randomly.
Pair Corralation between Svenska Cellulosa and AB SKF
Assuming the 90 days trading horizon Svenska Cellulosa is expected to generate 4.64 times less return on investment than AB SKF. But when comparing it to its historical volatility, Svenska Cellulosa Aktiebolaget is 1.17 times less risky than AB SKF. It trades about 0.01 of its potential returns per unit of risk. AB SKF is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 16,408 in AB SKF on August 30, 2024 and sell it today you would earn a total of 3,992 from holding AB SKF or generate 24.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Svenska Cellulosa Aktiebolaget vs. AB SKF
Performance |
| Timeline |
| Svenska Cellulosa |
| AB SKF |
Svenska Cellulosa and AB SKF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Svenska Cellulosa and AB SKF
The main advantage of trading using opposite Svenska Cellulosa and AB SKF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Svenska Cellulosa position performs unexpectedly, AB SKF 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 AB SKF will offset losses from the drop in AB SKF's long position.| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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