Correlation Between Stora Enso and Canfor Pulp

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

Diversification Opportunities for Stora Enso and Canfor Pulp

0.41

Correlation Coefficient

Stora Enso  Canfor Pulp

Very weak diversification

The 3 months correlation between Stora and Canfor is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Canfor Pulp Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor Pulp Products 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 Canfor Pulp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor Pulp Products has no effect on the direction of Stora Enso i.e., Stora Enso and Canfor Pulp go up and down completely randomly.

Pair Corralation between Stora Enso and Canfor Pulp

If you would invest  58.00  in Canfor Pulp Products on September 15, 2024 and sell it today you would earn a total of  2.00  from holding Canfor Pulp Products or generate 3.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Stora Enso Oyj  vs.  Canfor Pulp Products

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. In spite of fairly strong basic indicators, Stora Enso is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Canfor Pulp Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canfor Pulp Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Canfor Pulp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Stora Enso and Canfor Pulp

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

The idea behind Stora Enso Oyj and Canfor Pulp Products 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.