Correlation Between X FAB and Stora Enso
Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and Stora Enso Oyj, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Stora Enso.
Diversification Opportunities for X FAB and Stora Enso
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between XFB and Stora is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries 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 X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Stora Enso go up and down completely randomly.
Pair Corralation between X FAB and Stora Enso
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 2.69 times more return on investment than Stora Enso. However, X FAB is 2.69 times more volatile than Stora Enso Oyj. It trades about 0.11 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.53 per unit of risk. If you would invest 415.00 in X FAB Silicon Foundries on September 4, 2024 and sell it today you would earn a total of 24.00 from holding X FAB Silicon Foundries or generate 5.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Stora Enso Oyj
Performance |
| Timeline |
| X FAB Silicon |
| Stora Enso Oyj |
X FAB and Stora Enso Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Stora Enso
The main advantage of trading using opposite X FAB and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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.The idea behind X FAB Silicon Foundries and Stora Enso Oyj pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Stora Enso vs. Lendlease Group | Stora Enso vs. Gruppo Mutuionline SpA | Stora Enso vs. FUYO GENERAL LEASE | Stora Enso vs. Lion One Metals |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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