Correlation Between Alandsbanken Abp and Tecnotree Oyj

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

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

Diversification Opportunities for Alandsbanken Abp and Tecnotree Oyj

0.67

Correlation Coefficient

Alandsbanken Abp  Tecnotree Oyj

Poor diversification

The 3 months correlation between Alandsbanken and Tecnotree is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alandsbanken Abp B and Tecnotree Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecnotree Oyj and Alandsbanken Abp 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 Alandsbanken Abp B are associated (or correlated) with Tecnotree Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecnotree Oyj has no effect on the direction of Alandsbanken Abp i.e., Alandsbanken Abp and Tecnotree Oyj go up and down completely randomly.

Pair Corralation between Alandsbanken Abp and Tecnotree Oyj

Assuming the 90 days trading horizon Alandsbanken Abp is expected to generate 2.33 times less return on investment than Tecnotree Oyj. But when comparing it to its historical volatility, Alandsbanken Abp B is 5.25 times less risky than Tecnotree Oyj. It trades about 0.26 of its potential returns per unit of risk. Tecnotree Oyj is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  279.00  in Tecnotree Oyj on December 3, 2024 and sell it today you would earn a total of  90.00  from holding Tecnotree Oyj or generate 32.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Alandsbanken Abp B  vs.  Tecnotree Oyj

Alandsbanken Abp B

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alandsbanken Abp B are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Alandsbanken Abp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tecnotree Oyj

Risk-Adjusted Performance

OK

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

Pair Trading with Alandsbanken Abp and Tecnotree Oyj

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

The idea behind Alandsbanken Abp B and Tecnotree 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 Transaction History module to view history of all your transactions and understand their impact on performance.