Correlation Between BillerudKorsnas and Svenska Cellulosa

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

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

Diversification Opportunities for BillerudKorsnas and Svenska Cellulosa

0.53

Correlation Coefficient

BillerudKorsnas  Svenska Cellulosa

Very weak diversification

The 3 months correlation between BillerudKorsnas and Svenska is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BillerudKorsnas AB and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and BillerudKorsnas 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 BillerudKorsnas AB 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 BillerudKorsnas i.e., BillerudKorsnas and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between BillerudKorsnas and Svenska Cellulosa

Assuming the 90 days trading horizon BillerudKorsnas AB is expected to generate 1.31 times more return on investment than Svenska Cellulosa. However, BillerudKorsnas is 1.31 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about -0.04 of its potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about -0.06 per unit of risk. If you would invest  10,710  in BillerudKorsnas AB on September 24, 2024 and sell it today you would lose (820.00) from holding BillerudKorsnas AB or give up 7.66% of portfolio value over 90 days.

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

BillerudKorsnas AB  vs.  Svenska Cellulosa Aktiebolaget

BillerudKorsnas AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BillerudKorsnas AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BillerudKorsnas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BillerudKorsnas and Svenska Cellulosa

The main advantage of trading using opposite BillerudKorsnas and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BillerudKorsnas 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 BillerudKorsnas AB 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.