Correlation Between STORA ENSO and Glatfelter

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

Diversification Opportunities for STORA ENSO and Glatfelter

-0.36

Correlation Coefficient

STORA ENSO  Glatfelter

Very good diversification

The 3 months correlation between STORA and Glatfelter is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding STORA ENSO OYJ and Glatfelter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glatfelter 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 Glatfelter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glatfelter has no effect on the direction of STORA ENSO i.e., STORA ENSO and Glatfelter go up and down completely randomly.

Pair Corralation between STORA ENSO and Glatfelter

Assuming the 90 days trading horizon STORA ENSO OYJ is expected to under-perform the Glatfelter. But the stock apears to be less risky and, when comparing its historical volatility, STORA ENSO OYJ is 1.18 times less risky than Glatfelter. The stock trades about -0.12 of its potential returns per unit of risk. The Glatfelter is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,041  in Glatfelter on September 19, 2024 and sell it today you would lose (9.00) from holding Glatfelter or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

STORA ENSO OYJ  vs.  Glatfelter

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Glatfelter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glatfelter has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Glatfelter is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STORA ENSO and Glatfelter

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

The idea behind STORA ENSO OYJ and Glatfelter 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.