Correlation Between SVENSKA CELLULO and Svenska Cellulosa

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

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

Diversification Opportunities for SVENSKA CELLULO and Svenska Cellulosa

0.94

Correlation Coefficient

SVENSKA CELLULO  Svenska Cellulosa

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 CELLULO B and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and SVENSKA CELLULO 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 CELLULO B 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 SVENSKA CELLULO i.e., SVENSKA CELLULO and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between SVENSKA CELLULO and Svenska Cellulosa

Assuming the 90 days trading horizon SVENSKA CELLULO B is expected to generate 0.88 times more return on investment than Svenska Cellulosa. However, SVENSKA CELLULO B is 1.14 times less risky than Svenska Cellulosa. It trades about -0.25 of its potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about -0.25 per unit of risk. 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 CELLULO B   vs.  Svenska Cellulosa Aktiebolaget

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.

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.

Pair Trading with SVENSKA CELLULO and Svenska Cellulosa

The main advantage of trading using opposite SVENSKA CELLULO and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SVENSKA CELLULO 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 SVENSKA CELLULO B 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.