Correlation Between Stora Enso and Fair Isaac

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

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

Diversification Opportunities for Stora Enso and Fair Isaac

-0.83

Correlation Coefficient

Stora Enso  Fair Isaac

Pay attention - limited upside

The 3 months correlation between Stora and Fair is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp and Stora Enso 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 Stora Enso Oyj are associated (or correlated) with Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Stora Enso i.e., Stora Enso and Fair Isaac go up and down completely randomly.

Pair Corralation between Stora Enso and Fair Isaac

Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the Fair Isaac. But the stock apears to be less risky and, when comparing its historical volatility, Stora Enso Oyj is 1.15 times less risky than Fair Isaac. The stock trades about -0.08 of its potential returns per unit of risk. The Fair Isaac Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  169,200  in Fair Isaac Corp on September 15, 2024 and sell it today you would earn a total of  39,700  from holding Fair Isaac Corp or generate 23.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Stora Enso Oyj  vs.  Fair Isaac Corp

Stora Enso Oyj

Risk-Adjusted Performance

0 of 100

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 latest uncertain 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.

Fair Isaac Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stora Enso and Fair Isaac

The main advantage of trading using opposite Stora Enso and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso position performs unexpectedly, Fair Isaac 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 Fair Isaac will offset losses from the drop in Fair Isaac's long position.

The idea behind Stora Enso Oyj and Fair Isaac Corp 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.