Correlation Between Swedbank and Stora Enso

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

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

Diversification Opportunities for Swedbank and Stora Enso

-0.41

Correlation Coefficient

Swedbank  Stora Enso

Very good diversification

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

Pair Corralation between Swedbank and Stora Enso

Assuming the 90 days trading horizon Swedbank AB is expected to generate 0.85 times more return on investment than Stora Enso. However, Swedbank AB is 1.18 times less risky than Stora Enso. It trades about 0.07 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.04 per unit of risk. If you would invest  17,247  in Swedbank AB on September 14, 2024 and sell it today you would earn a total of  4,663  from holding Swedbank AB or generate 27.04% return on investment over 90 days.

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

Swedbank AB  vs.  Stora Enso Oyj

Swedbank AB

Risk-Adjusted Performance

1 of 100

Weak

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

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.

Pair Trading with Swedbank and Stora Enso

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

The idea behind Swedbank AB and Stora Enso Oyj 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.