Correlation Between Papa Johns and Holmen AB

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

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

Diversification Opportunities for Papa Johns and Holmen AB

0.34

Correlation Coefficient

Papa Johns  Holmen AB

Weak diversification

The 3 months correlation between Papa and Holmen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Papa Johns International and Holmen AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holmen AB and Papa Johns 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 Papa Johns International 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 Papa Johns i.e., Papa Johns and Holmen AB go up and down completely randomly.

Pair Corralation between Papa Johns and Holmen AB

Assuming the 90 days horizon Papa Johns International is expected to under-perform the Holmen AB. In addition to that, Papa Johns is 2.95 times more volatile than Holmen AB. It trades about -0.06 of its total potential returns per unit of risk. Holmen AB is currently generating about 0.1 per unit of volatility. If you would invest  3,480  in Holmen AB on October 22, 2024 and sell it today you would earn a total of  80.00  from holding Holmen AB or generate 2.3% return on investment over 90 days.

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

Papa Johns International  vs.  Holmen AB

Papa Johns International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papa Johns International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Holmen AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Papa Johns and Holmen AB

The main advantage of trading using opposite Papa Johns and Holmen AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Papa Johns 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 Papa Johns International 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.