Correlation Between SSAB AB and Svenska Cellulosa

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

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

Diversification Opportunities for SSAB AB and Svenska Cellulosa

0.13

Correlation Coefficient

SSAB AB  Svenska Cellulosa

Average diversification

The 3 months correlation between SSAB and Svenska is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding SSAB AB and Svenska Cellulosa Aktiebolaget in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Svenska Cellulosa and SSAB 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 SSAB AB 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 SSAB AB i.e., SSAB AB and Svenska Cellulosa go up and down completely randomly.

Pair Corralation between SSAB AB and Svenska Cellulosa

Assuming the 90 days trading horizon SSAB AB is expected to generate 1.16 times more return on investment than Svenska Cellulosa. However, SSAB AB is 1.16 times more volatile than Svenska Cellulosa Aktiebolaget. It trades about 0.07 of its potential returns per unit of risk. Svenska Cellulosa Aktiebolaget is currently generating about 0.04 per unit of risk. If you would invest  4,530  in SSAB AB on September 5, 2024 and sell it today you would earn a total of  359.00  from holding SSAB AB or generate 7.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SSAB AB  vs.  Svenska Cellulosa Aktiebolaget

SSAB AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SSAB AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, SSAB AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Svenska Cellulosa

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Svenska Cellulosa Aktiebolaget are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Svenska Cellulosa is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SSAB AB and Svenska Cellulosa

The main advantage of trading using opposite SSAB AB and Svenska Cellulosa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSAB AB 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 SSAB AB 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.