Correlation Between Svenska Cellulosa and Interfor

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

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

Diversification Opportunities for Svenska Cellulosa and Interfor

0.2

Correlation Coefficient

Svenska Cellulosa  Interfor

Modest diversification

The 3 months correlation between Svenska and Interfor is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Svenska Cellulosa Aktiebolaget and Interfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interfor and Svenska Cellulosa 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 Svenska Cellulosa Aktiebolaget are associated (or correlated) with Interfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interfor has no effect on the direction of Svenska Cellulosa i.e., Svenska Cellulosa and Interfor go up and down completely randomly.

Pair Corralation between Svenska Cellulosa and Interfor

Assuming the 90 days horizon Svenska Cellulosa Aktiebolaget is expected to under-perform the Interfor. But the pink sheet apears to be less risky and, when comparing its historical volatility, Svenska Cellulosa Aktiebolaget is 2.19 times less risky than Interfor. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Interfor is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,208  in Interfor on September 4, 2024 and sell it today you would earn a total of  248.00  from holding Interfor or generate 20.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Svenska Cellulosa Aktiebolaget  vs.  Interfor

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 nearly stable fundamental drivers, Svenska Cellulosa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Interfor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Interfor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Interfor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Svenska Cellulosa and Interfor

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

The idea behind Svenska Cellulosa Aktiebolaget and Interfor 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.