Correlation Between ENN Energy and Svenska Cellulosa

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

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

Diversification Opportunities for ENN Energy and Svenska Cellulosa

-0.41

Correlation Coefficient

ENN Energy  Svenska Cellulosa

Very good diversification

The 3 months correlation between ENN and Svenska is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and ENN Energy 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 ENN Energy Holdings 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 ENN Energy i.e., ENN Energy and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between ENN Energy and Svenska Cellulosa

Assuming the 90 days trading horizon ENN Energy is expected to generate 1.65 times less return on investment than Svenska Cellulosa. In addition to that, ENN Energy is 1.53 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about 0.02 of its total potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about 0.05 per unit of volatility. If you would invest  770.00  in Svenska Cellulosa Aktiebolaget on September 24, 2024 and sell it today you would earn a total of  401.00  from holding Svenska Cellulosa Aktiebolaget or generate 52.08% return on investment over 90 days.

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

ENN Energy Holdings  vs.  Svenska Cellulosa Aktiebolaget

ENN Energy Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, ENN Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 ENN Energy and Svenska Cellulosa

The main advantage of trading using opposite ENN Energy and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENN Energy 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 ENN Energy Holdings 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.