Correlation Between AB SKF and Stora Enso
Can any of the company-specific risk be diversified away by investing in both AB SKF 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 AB SKF and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AB SKF and Stora Enso Oyj, you can compare the effects of market volatilities on AB SKF 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 AB SKF with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of AB SKF and Stora Enso.
Diversification Opportunities for AB SKF and Stora Enso
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SKF-B and Stora is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding AB SKF 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 AB SKF 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 AB SKF 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 AB SKF i.e., AB SKF and Stora Enso go up and down completely randomly.
Pair Corralation between AB SKF and Stora Enso
Assuming the 90 days trading horizon AB SKF is expected to generate 1.22 times more return on investment than Stora Enso. However, AB SKF is 1.22 times more volatile than Stora Enso Oyj. It trades about 0.0 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.38 per unit of risk. If you would invest 20,300 in AB SKF on August 29, 2024 and sell it today you would lose (60.00) from holding AB SKF or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
AB SKF vs. Stora Enso Oyj
Performance |
| Timeline |
| AB SKF |
| Stora Enso Oyj |
AB SKF and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AB SKF and Stora Enso
The main advantage of trading using opposite AB SKF and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AB SKF 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 AB SKF 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. Svenska Cellulosa Aktiebolaget | Stora Enso vs. Holmen AB | Stora Enso vs. Trelleborg AB | Stora Enso vs. AB SKF |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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