Correlation Between Incap Oyj and Stora Enso

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

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

Diversification Opportunities for Incap Oyj and Stora Enso

0.42

Correlation Coefficient

Incap Oyj  Stora Enso

Very weak diversification

The 3 months correlation between Incap and Stora is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Incap Oyj and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso Oyj and Incap Oyj 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 Incap Oyj are associated (or correlated) with Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of Incap Oyj i.e., Incap Oyj and Stora Enso go up and down completely randomly.

Pair Corralation between Incap Oyj and Stora Enso

Assuming the 90 days trading horizon Incap Oyj is expected to generate 0.99 times more return on investment than Stora Enso. However, Incap Oyj is 1.01 times less risky than Stora Enso. It trades about 0.1 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.03 per unit of risk. If you would invest  1,024  in Incap Oyj on December 30, 2024 and sell it today you would earn a total of  125.00  from holding Incap Oyj or generate 12.21% return on investment over 90 days.

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

Incap Oyj  vs.  Stora Enso Oyj

Incap Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Incap Oyj are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Incap Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Stora Enso Oyj

Risk-Adjusted Performance

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 fairly strong technical indicators, Stora Enso is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Incap Oyj and Stora Enso

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

The idea behind Incap Oyj and Stora Enso Oyj 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.