Correlation Between Holmen AB and IT Tech

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

By analyzing existing cross correlation between Holmen AB ADR and IT Tech Packaging, you can compare the effects of market volatilities on Holmen AB and IT Tech 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 IT Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and IT Tech.

Diversification Opportunities for Holmen AB and IT Tech

0.0

Correlation Coefficient

Holmen AB  IT Tech

Pay attention - limited upside

The 3 months correlation between Holmen and ITP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB ADR and IT Tech Packaging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IT Tech Packaging 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 ADR are associated (or correlated) with IT Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IT Tech Packaging has no effect on the direction of Holmen AB i.e., Holmen AB and IT Tech go up and down completely randomly.

Pair Corralation between Holmen AB and IT Tech

If you would invest  27.00  in IT Tech Packaging on December 27, 2024 and sell it today you would earn a total of  0.00  from holding IT Tech Packaging or generate 0.0% return on investment over 90 days.

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

Holmen AB ADR  vs.  IT Tech Packaging

Holmen AB ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Holmen AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Holmen AB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

IT Tech Packaging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IT Tech Packaging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IT Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holmen AB and IT Tech

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

The idea behind Holmen AB ADR and IT Tech Packaging 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.