Correlation Between Industrivarden and Holmen AB

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

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

Diversification Opportunities for Industrivarden and Holmen AB

0.66

Correlation Coefficient

Industrivarden  Holmen AB

Poor diversification

The 3 months correlation between Industrivarden and Holmen is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB and Industrivarden 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 Industrivarden AB ser are associated (or correlated) with Holmen AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holmen AB has no effect on the direction of Industrivarden i.e., Industrivarden and Holmen AB go up and down completely randomly.

Pair Corralation between Industrivarden and Holmen AB

Assuming the 90 days trading horizon Industrivarden is expected to generate 1.12 times less return on investment than Holmen AB. But when comparing it to its historical volatility, Industrivarden AB ser is 1.19 times less risky than Holmen AB. It trades about 0.04 of its potential returns per unit of risk. Holmen AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  40,940  in Holmen AB on September 4, 2024 and sell it today you would earn a total of  940.00  from holding Holmen AB or generate 2.3% return on investment over 90 days.

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

Industrivarden AB ser  vs.  Holmen AB

Industrivarden AB ser

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Industrivarden AB ser are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Industrivarden is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Holmen AB

Risk-Adjusted Performance

2 of 100

Very Weak

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 somewhat strong essential indicators, Holmen AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrivarden and Holmen AB

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

The idea behind Industrivarden AB ser and Holmen AB 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.