Correlation Between Svenska Cellulosa and Conifex Timber

Can any of the company-specific risk be diversified away by investing in both Svenska Cellulosa and Conifex Timber 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 Conifex Timber 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 Conifex Timber, you can compare the effects of market volatilities on Svenska Cellulosa and Conifex Timber 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 Conifex Timber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Svenska Cellulosa and Conifex Timber.

Diversification Opportunities for Svenska Cellulosa and Conifex Timber

-0.72

Correlation Coefficient

Svenska Cellulosa  Conifex Timber

Pay attention - limited upside

The 3 months correlation between Svenska and Conifex is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget and Conifex Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conifex Timber 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 Conifex Timber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conifex Timber has no effect on the direction of Svenska Cellulosa i.e., Svenska Cellulosa and Conifex Timber go up and down completely randomly.

Pair Corralation between Svenska Cellulosa and Conifex Timber

Assuming the 90 days horizon Svenska Cellulosa Aktiebolaget is expected to generate 0.34 times more return on investment than Conifex Timber. However, Svenska Cellulosa Aktiebolaget is 2.97 times less risky than Conifex Timber. It trades about 0.13 of its potential returns per unit of risk. Conifex Timber is currently generating about -0.15 per unit of risk. If you would invest  1,225  in Svenska Cellulosa Aktiebolaget on December 30, 2024 and sell it today you would earn a total of  118.00  from holding Svenska Cellulosa Aktiebolaget or generate 9.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Svenska Cellulosa Aktiebolaget  vs.  Conifex Timber

Svenska Cellulosa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Cellulosa Aktiebolaget are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, Svenska Cellulosa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Conifex Timber

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Svenska Cellulosa and Conifex Timber

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

The idea behind Svenska Cellulosa Aktiebolaget and Conifex Timber 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.