Correlation Between Holmen AB and Oji Holdings

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

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

Diversification Opportunities for Holmen AB and Oji Holdings

0.64

Correlation Coefficient

Holmen AB  Oji Holdings

Poor diversification

The 3 months correlation between Holmen and Oji is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and Oji Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oji Holdings and Holmen AB 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 Holmen AB are associated (or correlated) with Oji Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oji Holdings has no effect on the direction of Holmen AB i.e., Holmen AB and Oji Holdings go up and down completely randomly.

Pair Corralation between Holmen AB and Oji Holdings

Assuming the 90 days trading horizon Holmen AB is expected to generate 1.64 times less return on investment than Oji Holdings. But when comparing it to its historical volatility, Holmen AB is 1.06 times less risky than Oji Holdings. It trades about 0.11 of its potential returns per unit of risk. Oji Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  376.00  in Oji Holdings on December 5, 2024 and sell it today you would earn a total of  18.00  from holding Oji Holdings or generate 4.79% return on investment over 90 days.

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

Holmen AB  vs.  Oji Holdings

Holmen AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holmen AB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Holmen AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Oji Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oji Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Oji Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holmen AB and Oji Holdings

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

The idea behind Holmen AB and Oji Holdings 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.