Correlation Between Stora Enso and AB Electrolux
Can any of the company-specific risk be diversified away by investing in both Stora Enso and AB Electrolux 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 AB Electrolux 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 AB Electrolux, you can compare the effects of market volatilities on Stora Enso and AB Electrolux 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 AB Electrolux. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stora Enso and AB Electrolux.
Diversification Opportunities for Stora Enso and AB Electrolux
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Stora and ELUX-B is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and AB Electrolux in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Electrolux 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 AB Electrolux. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Electrolux has no effect on the direction of Stora Enso i.e., Stora Enso and AB Electrolux go up and down completely randomly.
Pair Corralation between Stora Enso and AB Electrolux
Assuming the 90 days trading horizon Stora Enso Oyj is expected to generate 0.72 times more return on investment than AB Electrolux. However, Stora Enso Oyj is 1.39 times less risky than AB Electrolux. It trades about -0.03 of its potential returns per unit of risk. AB Electrolux is currently generating about -0.04 per unit of risk. If you would invest 15,870 in Stora Enso Oyj on August 28, 2024 and sell it today you would lose (4,810) from holding Stora Enso Oyj or give up 30.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stora Enso Oyj vs. AB Electrolux
Performance |
| Timeline |
| Stora Enso Oyj |
| AB Electrolux |
Stora Enso and AB Electrolux Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stora Enso and AB Electrolux
The main advantage of trading using opposite Stora Enso and AB Electrolux positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso position performs unexpectedly, AB Electrolux 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 Electrolux will offset losses from the drop in AB Electrolux's long position.| Stora Enso vs. Tele2 AB | Stora Enso vs. BillerudKorsnas AB | Stora Enso vs. Svenska Cellulosa Aktiebolaget |
| AB Electrolux vs. Precise Biometrics AB | AB Electrolux vs. Anoto Group AB | AB Electrolux vs. Bong AB | AB Electrolux vs. Episurf Medical 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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