Correlation Between Stora Enso and EQ Oyj
Can any of the company-specific risk be diversified away by investing in both Stora Enso and EQ Oyj 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 EQ Oyj 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 eQ Oyj, you can compare the effects of market volatilities on Stora Enso and EQ Oyj 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 EQ Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stora Enso and EQ Oyj.
Diversification Opportunities for Stora Enso and EQ Oyj
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stora and EQV1V is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and eQ Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eQ Oyj 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 EQ Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eQ Oyj has no effect on the direction of Stora Enso i.e., Stora Enso and EQ Oyj go up and down completely randomly.
Pair Corralation between Stora Enso and EQ Oyj
Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the EQ Oyj. In addition to that, Stora Enso is 1.49 times more volatile than eQ Oyj. It trades about -0.28 of its total potential returns per unit of risk. eQ Oyj is currently generating about -0.17 per unit of volatility. If you would invest 1,355 in eQ Oyj on August 28, 2024 and sell it today you would lose (65.00) from holding eQ Oyj or give up 4.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stora Enso Oyj vs. eQ Oyj
Performance |
| Timeline |
| Stora Enso Oyj |
| eQ Oyj |
Stora Enso and EQ Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stora Enso and EQ Oyj
The main advantage of trading using opposite Stora Enso and EQ Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso position performs unexpectedly, EQ Oyj 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 EQ Oyj will offset losses from the drop in EQ Oyj's long position.| Stora Enso vs. Stora Enso Oyj | Stora Enso vs. UPM Kymmene Oyj | Stora Enso vs. Huhtamaki Oyj | Stora Enso vs. Orion Oyj A |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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