Correlation Between Poste Italiane and Stora Enso

Can any of the company-specific risk be diversified away by investing in both Poste Italiane 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 Poste Italiane and Stora Enso into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Poste Italiane SpA and Stora Enso Oyj, you can compare the effects of market volatilities on Poste Italiane 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 Poste Italiane with a short position of Stora Enso. Check out your portfolio center. Please also check ongoing floating volatility patterns of Poste Italiane and Stora Enso.

Diversification Opportunities for Poste Italiane and Stora Enso

0.06

Correlation Coefficient

Poste Italiane  Stora Enso

Significant diversification

The 3 months correlation between Poste and Stora is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Poste Italiane SpA 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 Poste Italiane 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 Poste Italiane SpA 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 Poste Italiane i.e., Poste Italiane and Stora Enso go up and down completely randomly.

Pair Corralation between Poste Italiane and Stora Enso

Assuming the 90 days horizon Poste Italiane SpA is expected to generate 0.45 times more return on investment than Stora Enso. However, Poste Italiane SpA is 2.24 times less risky than Stora Enso. It trades about 0.35 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.03 per unit of risk. If you would invest  1,354  in Poste Italiane SpA on December 28, 2024 and sell it today you would earn a total of  280.00  from holding Poste Italiane SpA or generate 20.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Poste Italiane SpA  vs.  Stora Enso Oyj

Poste Italiane SpA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Poste Italiane SpA are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Poste Italiane reported solid returns over the last few months and may actually be approaching a breakup point.

Stora Enso Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stora Enso is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Poste Italiane and Stora Enso

The main advantage of trading using opposite Poste Italiane and Stora Enso positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Poste Italiane 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 Poste Italiane SpA 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.