Correlation Between Stora Enso and Husqvarna

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

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

Diversification Opportunities for Stora Enso and Husqvarna

0.49

Correlation Coefficient

Stora Enso  Husqvarna

Very weak diversification

The 3 months correlation between Stora and Husqvarna is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Husqvarna AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husqvarna AB and Stora Enso 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 Stora Enso Oyj are associated (or correlated) with Husqvarna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husqvarna AB has no effect on the direction of Stora Enso i.e., Stora Enso and Husqvarna go up and down completely randomly.

Pair Corralation between Stora Enso and Husqvarna

Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the Husqvarna. But the stock apears to be less risky and, when comparing its historical volatility, Stora Enso Oyj is 1.08 times less risky than Husqvarna. The stock trades about -0.14 of its potential returns per unit of risk. The Husqvarna AB is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,420  in Husqvarna AB on September 4, 2024 and sell it today you would lose (70.00) from holding Husqvarna AB or give up 1.09% of portfolio value over 90 days.

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

Stora Enso Oyj  vs.  Husqvarna AB

Stora Enso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Husqvarna AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husqvarna AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Husqvarna is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stora Enso and Husqvarna

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

The idea behind Stora Enso Oyj and Husqvarna 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.