Correlation Between Stora Enso and Fondia Oyj
Can any of the company-specific risk be diversified away by investing in both Stora Enso and Fondia 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 Fondia 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 Fondia Oyj, you can compare the effects of market volatilities on Stora Enso and Fondia 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 Fondia Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stora Enso and Fondia Oyj.
Diversification Opportunities for Stora Enso and Fondia Oyj
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stora and Fondia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Fondia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fondia 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 Fondia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fondia Oyj has no effect on the direction of Stora Enso i.e., Stora Enso and Fondia Oyj go up and down completely randomly.
Pair Corralation between Stora Enso and Fondia Oyj
Assuming the 90 days trading horizon Stora Enso Oyj is expected to generate 0.53 times more return on investment than Fondia Oyj. However, Stora Enso Oyj is 1.9 times less risky than Fondia Oyj. It trades about -0.25 of its potential returns per unit of risk. Fondia Oyj is currently generating about -0.24 per unit of risk. If you would invest 1,020 in Stora Enso Oyj on September 1, 2024 and sell it today you would lose (96.00) from holding Stora Enso Oyj or give up 9.41% 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. Fondia Oyj
Performance |
| Timeline |
| Stora Enso Oyj |
| Fondia Oyj |
Stora Enso and Fondia Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stora Enso and Fondia Oyj
The main advantage of trading using opposite Stora Enso and Fondia Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso position performs unexpectedly, Fondia 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 Fondia Oyj will offset losses from the drop in Fondia Oyj's long position.| Stora Enso vs. Stora Enso Oyj | Stora Enso vs. Metsa Board Oyj | Stora Enso vs. UPM Kymmene Oyj | Stora Enso vs. Huhtamaki Oyj |
| Fondia Oyj vs. Admicom Oyj | Fondia Oyj vs. Talenom Oyj | Fondia Oyj vs. Vincit Group Oyj | Fondia Oyj vs. Harvia Oyj |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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