Correlation Between Industrivarden and Svenska Cellulosa

Can any of the company-specific risk be diversified away by investing in both Industrivarden and Svenska Cellulosa 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 Svenska Cellulosa 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 Svenska Cellulosa Aktiebolaget, you can compare the effects of market volatilities on Industrivarden and Svenska Cellulosa 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 Svenska Cellulosa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrivarden and Svenska Cellulosa.

Diversification Opportunities for Industrivarden and Svenska Cellulosa

0.5

Correlation Coefficient

Industrivarden  Svenska Cellulosa

Very weak diversification

The 3 months correlation between Industrivarden and Svenska is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Industrivarden AB ser and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa 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 Svenska Cellulosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Svenska Cellulosa has no effect on the direction of Industrivarden i.e., Industrivarden and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between Industrivarden and Svenska Cellulosa

Assuming the 90 days trading horizon Industrivarden AB ser is expected to under-perform the Svenska Cellulosa. But the stock apears to be less risky and, when comparing its historical volatility, Industrivarden AB ser is 1.75 times less risky than Svenska Cellulosa. The stock trades about -0.01 of its potential returns per unit of risk. The Svenska Cellulosa Aktiebolaget is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14,060  in Svenska Cellulosa Aktiebolaget on September 3, 2024 and sell it today you would earn a total of  110.00  from holding Svenska Cellulosa Aktiebolaget or generate 0.78% return on investment over 90 days.

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

Industrivarden AB ser  vs.  Svenska Cellulosa Aktiebolaget

Industrivarden AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrivarden AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Svenska Cellulosa

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Cellulosa Aktiebolaget are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Svenska Cellulosa is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Industrivarden and Svenska Cellulosa

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

The idea behind Industrivarden AB ser and Svenska Cellulosa Aktiebolaget 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.