Correlation Between Holmen AB and Suzano SA

Can any of the company-specific risk be diversified away by investing in both Holmen AB and Suzano SA 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 Holmen AB and Suzano SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holmen AB and Suzano SA, you can compare the effects of market volatilities on Holmen AB and Suzano SA 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 Holmen AB with a short position of Suzano SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holmen AB and Suzano SA.

Diversification Opportunities for Holmen AB and Suzano SA

-0.71

Correlation Coefficient

Holmen AB  Suzano SA

Pay attention - limited upside

The 3 months correlation between Holmen and Suzano is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and Suzano SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzano SA and Holmen AB 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 Holmen AB are associated (or correlated) with Suzano SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzano SA has no effect on the direction of Holmen AB i.e., Holmen AB and Suzano SA go up and down completely randomly.

Pair Corralation between Holmen AB and Suzano SA

Assuming the 90 days trading horizon Holmen AB is expected to under-perform the Suzano SA. But the stock apears to be less risky and, when comparing its historical volatility, Holmen AB is 1.35 times less risky than Suzano SA. The stock trades about -0.05 of its potential returns per unit of risk. The Suzano SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  831.00  in Suzano SA on September 19, 2024 and sell it today you would earn a total of  144.00  from holding Suzano SA or generate 17.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Holmen AB  vs.  Suzano SA

Holmen AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Suzano SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Suzano SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Suzano SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holmen AB and Suzano SA

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

The idea behind Holmen AB and Suzano SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.