Correlation Between Stora Enso and Svenska Cellulosa
Can any of the company-specific risk be diversified away by investing in both Stora Enso 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 Stora Enso and Svenska Cellulosa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stora Enso Oyj and Svenska Cellulosa Aktiebolaget, you can compare the effects of market volatilities on Stora Enso 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 Stora Enso with a short position of Svenska Cellulosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stora Enso and Svenska Cellulosa.
Diversification Opportunities for Stora Enso and Svenska Cellulosa
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stora and Svenska is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and Stora Enso 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 Stora Enso Oyj 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 Stora Enso i.e., Stora Enso and Svenska Cellulosa go up and down completely randomly.
Pair Corralation between Stora Enso and Svenska Cellulosa
Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the Svenska Cellulosa. In addition to that, Stora Enso is 1.25 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about -0.15 of its total potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about -0.05 per unit of volatility. If you would invest 15,915 in Svenska Cellulosa Aktiebolaget on September 1, 2024 and sell it today you would lose (1,745) from holding Svenska Cellulosa Aktiebolaget or give up 10.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stora Enso Oyj vs. Svenska Cellulosa Aktiebolaget
Performance |
| Timeline |
| Stora Enso Oyj |
| Svenska Cellulosa |
Stora Enso and Svenska Cellulosa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stora Enso and Svenska Cellulosa
The main advantage of trading using opposite Stora Enso and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso 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.| Stora Enso vs. Svenska Cellulosa Aktiebolaget | Stora Enso vs. Holmen AB | Stora Enso vs. AB SKF | Stora Enso vs. Trelleborg 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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