Correlation Between Boise Cascade and Svenska Cellulosa

Can any of the company-specific risk be diversified away by investing in both Boise Cascade 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 Boise Cascade and Svenska Cellulosa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boise Cascade and Svenska Cellulosa Aktiebolaget, you can compare the effects of market volatilities on Boise Cascade 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 Boise Cascade with a short position of Svenska Cellulosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boise Cascade and Svenska Cellulosa.

Diversification Opportunities for Boise Cascade and Svenska Cellulosa

0.1

Correlation Coefficient

Boise Cascade  Svenska Cellulosa

Average diversification

The 3 months correlation between Boise and Svenska is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Boise Cascade and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and Boise Cascade 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 Boise Cascade 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 Boise Cascade i.e., Boise Cascade and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between Boise Cascade and Svenska Cellulosa

Assuming the 90 days horizon Boise Cascade is expected to under-perform the Svenska Cellulosa. But the stock apears to be less risky and, when comparing its historical volatility, Boise Cascade is 1.05 times less risky than Svenska Cellulosa. The stock trades about -0.73 of its potential returns per unit of risk. The Svenska Cellulosa Aktiebolaget is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,232  in Svenska Cellulosa Aktiebolaget on October 12, 2024 and sell it today you would lose (10.00) from holding Svenska Cellulosa Aktiebolaget or give up 0.81% of portfolio value over 90 days.

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

Boise Cascade  vs.  Svenska Cellulosa Aktiebolaget

Boise Cascade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boise Cascade has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Svenska Cellulosa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Boise Cascade and Svenska Cellulosa

The main advantage of trading using opposite Boise Cascade and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boise Cascade 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.

The idea behind Boise Cascade and Svenska Cellulosa Aktiebolaget 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.