Correlation Between Stora Enso and Trelleborg

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

Diversification Opportunities for Stora Enso and Trelleborg

0.3

Correlation Coefficient

Stora Enso  Trelleborg

Weak diversification

The 3 months correlation between Stora and Trelleborg is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Trelleborg AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trelleborg AB 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 Trelleborg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trelleborg AB has no effect on the direction of Stora Enso i.e., Stora Enso and Trelleborg go up and down completely randomly.

Pair Corralation between Stora Enso and Trelleborg

Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the Trelleborg. In addition to that, Stora Enso is 1.05 times more volatile than Trelleborg AB. It trades about -0.09 of its total potential returns per unit of risk. Trelleborg AB is currently generating about 0.02 per unit of volatility. If you would invest  38,940  in Trelleborg AB on September 16, 2024 and sell it today you would earn a total of  340.00  from holding Trelleborg AB or generate 0.87% return on investment over 90 days.

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

Stora Enso Oyj  vs.  Trelleborg AB

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Trelleborg AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Trelleborg AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Trelleborg is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stora Enso and Trelleborg

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

The idea behind Stora Enso Oyj and Trelleborg AB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.