Correlation Between Svenska Cellulosa and West Fraser
Can any of the company-specific risk be diversified away by investing in both Svenska Cellulosa and West Fraser 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 Svenska Cellulosa and West Fraser into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Svenska Cellulosa Aktiebolaget and West Fraser Timber, you can compare the effects of market volatilities on Svenska Cellulosa and West Fraser 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 Svenska Cellulosa with a short position of West Fraser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Cellulosa and West Fraser.
Diversification Opportunities for Svenska Cellulosa and West Fraser
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Svenska and West is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget and West Fraser Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Fraser Timber and Svenska Cellulosa 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 Svenska Cellulosa Aktiebolaget are associated (or correlated) with West Fraser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Fraser Timber has no effect on the direction of Svenska Cellulosa i.e., Svenska Cellulosa and West Fraser go up and down completely randomly.
Pair Corralation between Svenska Cellulosa and West Fraser
Assuming the 90 days horizon Svenska Cellulosa Aktiebolaget is expected to under-perform the West Fraser. But the pink sheet apears to be less risky and, when comparing its historical volatility, Svenska Cellulosa Aktiebolaget is 1.2 times less risky than West Fraser. The pink sheet trades about -0.05 of its potential returns per unit of risk. The West Fraser Timber is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,441 in West Fraser Timber on August 27, 2024 and sell it today you would earn a total of 2,005 from holding West Fraser Timber or generate 26.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 78.63% |
| Values | Daily Returns |
Svenska Cellulosa Aktiebolaget vs. West Fraser Timber
Performance |
| Timeline |
| Svenska Cellulosa |
| West Fraser Timber |
Svenska Cellulosa and West Fraser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Svenska Cellulosa and West Fraser
The main advantage of trading using opposite Svenska Cellulosa and West Fraser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Svenska Cellulosa position performs unexpectedly, West Fraser 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 West Fraser will offset losses from the drop in West Fraser's long position.| Svenska Cellulosa vs. Interfor | Svenska Cellulosa vs. Western Forest Products | Svenska Cellulosa vs. Stella Jones | Svenska Cellulosa vs. Simpson Manufacturing |
| West Fraser vs. Simpson Manufacturing | West Fraser vs. Interfor | West Fraser vs. Ufp Industries | West Fraser vs. Canfor |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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