Correlation Between Western Forest and Svenska Cellulosa
Can any of the company-specific risk be diversified away by investing in both Western Forest and Svenska Cellulosa 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 Western Forest and Svenska Cellulosa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Forest Products and Svenska Cellulosa Aktiebolaget, you can compare the effects of market volatilities on Western Forest and Svenska Cellulosa 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 Western Forest with a short position of Svenska Cellulosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Forest and Svenska Cellulosa.
Diversification Opportunities for Western Forest and Svenska Cellulosa
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Svenska is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Western Forest Products and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and Western Forest 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 Western Forest Products are associated (or correlated) with Svenska Cellulosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Cellulosa has no effect on the direction of Western Forest i.e., Western Forest and Svenska Cellulosa go up and down completely randomly.
Pair Corralation between Western Forest and Svenska Cellulosa
Assuming the 90 days horizon Western Forest Products is expected to generate 2.49 times more return on investment than Svenska Cellulosa. However, Western Forest is 2.49 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about 0.01 of its potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about 0.0 per unit of risk. If you would invest 33.00 in Western Forest Products on August 28, 2024 and sell it today you would earn a total of 0.00 from holding Western Forest Products or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Forest Products vs. Svenska Cellulosa Aktiebolaget
Performance |
| Timeline |
| Western Forest Products |
| Svenska Cellulosa |
Western Forest and Svenska Cellulosa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Forest and Svenska Cellulosa
The main advantage of trading using opposite Western Forest and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Forest position performs unexpectedly, Svenska Cellulosa 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 Svenska Cellulosa will offset losses from the drop in Svenska Cellulosa's long position.| Western Forest vs. Interfor | Western Forest vs. Svenska Cellulosa Aktiebolaget | Western Forest vs. Stella Jones | Western Forest vs. Simpson Manufacturing |
| Svenska Cellulosa vs. Interfor | Svenska Cellulosa vs. Western Forest Products | Svenska Cellulosa vs. Stella Jones | Svenska Cellulosa vs. Simpson Manufacturing |
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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