Correlation Between Enviva Partners and Svenska Cellulosa

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

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

Diversification Opportunities for Enviva Partners and Svenska Cellulosa

-0.28

Correlation Coefficient

Enviva Partners  Svenska Cellulosa

Very good diversification

The 3 months correlation between Enviva and Svenska is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Enviva Partners LP and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and Enviva Partners 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 Enviva Partners LP 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 Enviva Partners i.e., Enviva Partners and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between Enviva Partners and Svenska Cellulosa

Considering the 90-day investment horizon Enviva Partners LP is expected to generate 0.9 times more return on investment than Svenska Cellulosa. However, Enviva Partners LP is 1.11 times less risky than Svenska Cellulosa. It trades about 0.65 of its potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about -0.1 per unit of risk. If you would invest  40.00  in Enviva Partners LP on September 27, 2024 and sell it today you would earn a total of  2.00  from holding Enviva Partners LP or generate 5.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	9.52%
Values	Daily Returns

Enviva Partners LP  vs.  Svenska Cellulosa Aktiebolaget

Enviva Partners LP

Risk-Adjusted Performance

0 of 100

Excellent

Over the last 90 days Enviva Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat inconsistent basic indicators, Enviva Partners sustained 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 fragile performance, the Stock's fundamental drivers 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 Enviva Partners and Svenska Cellulosa

The main advantage of trading using opposite Enviva Partners and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enviva Partners 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 Enviva Partners LP 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.