Correlation Between Stora Enso and SSAB AB

Can any of the company-specific risk be diversified away by investing in both Stora Enso and SSAB 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 Stora Enso and SSAB AB 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 SSAB AB ser, you can compare the effects of market volatilities on Stora Enso and SSAB 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 Stora Enso with a short position of SSAB AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stora Enso and SSAB AB.

Diversification Opportunities for Stora Enso and SSAB AB

0.19

Correlation Coefficient

Stora Enso  SSAB AB

Average diversification

The 3 months correlation between Stora and SSAB is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and SSAB AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSAB AB ser 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 SSAB AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSAB AB ser has no effect on the direction of Stora Enso i.e., Stora Enso and SSAB AB go up and down completely randomly.

Pair Corralation between Stora Enso and SSAB AB

Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the SSAB AB. But the stock apears to be less risky and, when comparing its historical volatility, Stora Enso Oyj is 1.16 times less risky than SSAB AB. The stock trades about -0.01 of its potential returns per unit of risk. The SSAB AB ser is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  392.00  in SSAB AB ser on December 30, 2024 and sell it today you would earn a total of  198.00  from holding SSAB AB ser or generate 50.51% return on investment over 90 days.

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

Stora Enso Oyj  vs.  SSAB AB ser

Stora Enso Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Stora Enso is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

SSAB AB ser

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB ser are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SSAB AB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stora Enso and SSAB AB

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

The idea behind Stora Enso Oyj and SSAB AB ser 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.