Correlation Between Detection Technology and Sotkamo Silver

Can any of the company-specific risk be diversified away by investing in both Detection Technology and Sotkamo Silver 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 Sotkamo Silver 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 Sotkamo Silver AB, you can compare the effects of market volatilities on Detection Technology and Sotkamo Silver 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 Sotkamo Silver. Check out your portfolio center. Please also check ongoing floating volatility patterns of Detection Technology and Sotkamo Silver.

Diversification Opportunities for Detection Technology and Sotkamo Silver

0.08

Correlation Coefficient

Detection Technology  Sotkamo Silver

Significant diversification

The 3 months correlation between Detection and Sotkamo is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Detection Technology OY and Sotkamo Silver AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotkamo Silver AB 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 Sotkamo Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotkamo Silver AB has no effect on the direction of Detection Technology i.e., Detection Technology and Sotkamo Silver go up and down completely randomly.

Pair Corralation between Detection Technology and Sotkamo Silver

Assuming the 90 days trading horizon Detection Technology is expected to generate 4.94 times less return on investment than Sotkamo Silver. But when comparing it to its historical volatility, Detection Technology OY is 2.62 times less risky than Sotkamo Silver. It trades about 0.05 of its potential returns per unit of risk. Sotkamo Silver AB is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8.46  in Sotkamo Silver AB on October 21, 2024 and sell it today you would earn a total of  0.54  from holding Sotkamo Silver AB or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Detection Technology OY  vs.  Sotkamo Silver AB

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.

Sotkamo Silver AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotkamo Silver AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Sotkamo Silver is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Detection Technology and Sotkamo Silver

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

The idea behind Detection Technology OY and Sotkamo Silver AB 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.