Correlation Between Holmen AB and JonDeTech Sensors

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

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

Diversification Opportunities for Holmen AB and JonDeTech Sensors

-0.54

Correlation Coefficient

Holmen AB  JonDeTech Sensors

Excellent diversification

The 3 months correlation between Holmen and JonDeTech is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Holmen AB and JonDeTech Sensors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JonDeTech Sensors and Holmen 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 Holmen AB are associated (or correlated) with JonDeTech Sensors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JonDeTech Sensors has no effect on the direction of Holmen AB i.e., Holmen AB and JonDeTech Sensors go up and down completely randomly.

Pair Corralation between Holmen AB and JonDeTech Sensors

Assuming the 90 days trading horizon Holmen AB is expected to generate 0.25 times more return on investment than JonDeTech Sensors. However, Holmen AB is 4.06 times less risky than JonDeTech Sensors. It trades about -0.08 of its potential returns per unit of risk. JonDeTech Sensors is currently generating about -0.22 per unit of risk. If you would invest  43,213  in Holmen AB on February 1, 2024 and sell it today you would lose (713.00) from holding Holmen AB or give up 1.65% of portfolio value over 90 days.

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

Holmen AB  vs.  JonDeTech Sensors

Holmen AB

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Holmen AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Holmen AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

JonDeTech Sensors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JonDeTech Sensors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Holmen AB and JonDeTech Sensors

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

The idea behind Holmen AB and JonDeTech Sensors 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.