Correlation Between Detection Technology and Sanoma Oyj

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

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

Diversification Opportunities for Detection Technology and Sanoma Oyj

-0.59

Correlation Coefficient

Detection Technology  Sanoma Oyj

Excellent diversification

The 3 months correlation between Detection and Sanoma is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Detection Technology OY and Sanoma Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanoma Oyj and Detection Technology 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 Detection Technology OY are associated (or correlated) with Sanoma Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanoma Oyj has no effect on the direction of Detection Technology i.e., Detection Technology and Sanoma Oyj go up and down completely randomly.

Pair Corralation between Detection Technology and Sanoma Oyj

Assuming the 90 days trading horizon Detection Technology is expected to generate 1.71 times less return on investment than Sanoma Oyj. In addition to that, Detection Technology is 1.23 times more volatile than Sanoma Oyj. It trades about 0.12 of its total potential returns per unit of risk. Sanoma Oyj is currently generating about 0.26 per unit of volatility. If you would invest  770.00  in Sanoma Oyj on October 22, 2024 and sell it today you would earn a total of  50.00  from holding Sanoma Oyj or generate 6.49% return on investment over 90 days.

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

Detection Technology OY  vs.  Sanoma Oyj

Detection Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Detection Technology OY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Sanoma Oyj

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sanoma Oyj are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanoma Oyj sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Detection Technology and Sanoma Oyj

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

The idea behind Detection Technology OY and Sanoma 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..