Correlation Between Tele2 AB and Stora Enso
Can any of the company-specific risk be diversified away by investing in both Tele2 AB and Stora Enso 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 Tele2 AB and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tele2 AB and Stora Enso Oyj, you can compare the effects of market volatilities on Tele2 AB and Stora Enso 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 Tele2 AB with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tele2 AB and Stora Enso.
Diversification Opportunities for Tele2 AB and Stora Enso
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tele2 and Stora is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tele2 AB and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso Oyj and Tele2 AB 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 Tele2 AB are associated (or correlated) with Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of Tele2 AB i.e., Tele2 AB and Stora Enso go up and down completely randomly.
Pair Corralation between Tele2 AB and Stora Enso
Assuming the 90 days trading horizon Tele2 AB is expected to generate 1.47 times more return on investment than Stora Enso. However, Tele2 AB is 1.47 times more volatile than Stora Enso Oyj. It trades about 0.04 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.04 per unit of risk. If you would invest 8,414 in Tele2 AB on August 30, 2024 and sell it today you would earn a total of 2,886 from holding Tele2 AB or generate 34.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.79% |
| Values | Daily Returns |
Tele2 AB vs. Stora Enso Oyj
Performance |
| Timeline |
| Tele2 AB |
| Stora Enso Oyj |
Tele2 AB and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tele2 AB and Stora Enso
The main advantage of trading using opposite Tele2 AB and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tele2 AB position performs unexpectedly, Stora Enso 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 Stora Enso will offset losses from the drop in Stora Enso's long position.| Tele2 AB vs. Tele2 AB | Tele2 AB vs. AB SKF | Tele2 AB vs. Svenska Cellulosa Aktiebolaget | Tele2 AB vs. Holmen AB |
| Stora Enso vs. Svenska Cellulosa Aktiebolaget | Stora Enso vs. Holmen AB | Stora Enso vs. Trelleborg AB | Stora Enso vs. AB SKF |
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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