Correlation Between Canfor and Svenska Cellulosa

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

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

Diversification Opportunities for Canfor and Svenska Cellulosa

0.11

Correlation Coefficient

Canfor  Svenska Cellulosa

Average diversification

The 3 months correlation between Canfor and Svenska is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Canfor and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and Canfor 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 Canfor 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 Canfor i.e., Canfor and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between Canfor and Svenska Cellulosa

Assuming the 90 days horizon Canfor is expected to generate 4.86 times less return on investment than Svenska Cellulosa. In addition to that, Canfor is 1.61 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about 0.02 of its total potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about 0.13 per unit of volatility. If you would invest  1,225  in Svenska Cellulosa Aktiebolaget on December 30, 2024 and sell it today you would earn a total of  118.00  from holding Svenska Cellulosa Aktiebolaget or generate 9.63% return on investment over 90 days.

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

Canfor  vs.  Svenska Cellulosa Aktiebolaget

Canfor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canfor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Svenska Cellulosa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Cellulosa Aktiebolaget are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Svenska Cellulosa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Canfor and Svenska Cellulosa

The main advantage of trading using opposite Canfor and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canfor 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 Canfor 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.