Correlation Between Svenska Cellulosa and SVENSKA CELLULO

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

By analyzing existing cross correlation between Svenska Cellulosa Aktiebolaget and SVENSKA CELLULO B , you can compare the effects of market volatilities on Svenska Cellulosa and SVENSKA CELLULO 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 Svenska Cellulosa with a short position of SVENSKA CELLULO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Cellulosa and SVENSKA CELLULO.

Diversification Opportunities for Svenska Cellulosa and SVENSKA CELLULO

0.94

Correlation Coefficient

Svenska Cellulosa  SVENSKA CELLULO

Almost no diversification

The 3 months correlation between Svenska and SVENSKA is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget and SVENSKA CELLULO B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SVENSKA CELLULO B and Svenska Cellulosa 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 Svenska Cellulosa Aktiebolaget are associated (or correlated) with SVENSKA CELLULO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SVENSKA CELLULO B has no effect on the direction of Svenska Cellulosa i.e., Svenska Cellulosa and SVENSKA CELLULO go up and down completely randomly.

Pair Corralation between Svenska Cellulosa and SVENSKA CELLULO

Assuming the 90 days horizon Svenska Cellulosa Aktiebolaget is expected to under-perform the SVENSKA CELLULO. In addition to that, Svenska Cellulosa is 1.14 times more volatile than SVENSKA CELLULO B . It trades about -0.25 of its total potential returns per unit of risk. SVENSKA CELLULO B is currently generating about -0.25 per unit of volatility. If you would invest  1,255  in SVENSKA CELLULO B on September 24, 2024 and sell it today you would lose (77.00) from holding SVENSKA CELLULO B or give up 6.14% of portfolio value over 90 days.

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

Svenska Cellulosa Aktiebolaget  vs.  SVENSKA CELLULO B

Svenska Cellulosa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Svenska Cellulosa Aktiebolaget has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SVENSKA CELLULO B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SVENSKA CELLULO B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Svenska Cellulosa and SVENSKA CELLULO

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

The idea behind Svenska Cellulosa Aktiebolaget and SVENSKA CELLULO B 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.