Correlation Between Digia Oyj and Honkarakenne Oyj

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

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

Diversification Opportunities for Digia Oyj and Honkarakenne Oyj

-0.72

Correlation Coefficient

Digia Oyj  Honkarakenne Oyj

Pay attention - limited upside

The 3 months correlation between Digia and Honkarakenne is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Digia Oyj and Honkarakenne Oyj B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honkarakenne Oyj B and Digia Oyj 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 Digia Oyj are associated (or correlated) with Honkarakenne Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honkarakenne Oyj B has no effect on the direction of Digia Oyj i.e., Digia Oyj and Honkarakenne Oyj go up and down completely randomly.

Pair Corralation between Digia Oyj and Honkarakenne Oyj

Assuming the 90 days trading horizon Digia Oyj is expected to generate 1.29 times more return on investment than Honkarakenne Oyj. However, Digia Oyj is 1.29 times more volatile than Honkarakenne Oyj B. It trades about 0.18 of its potential returns per unit of risk. Honkarakenne Oyj B is currently generating about -0.2 per unit of risk. If you would invest  550.00  in Digia Oyj on October 10, 2024 and sell it today you would earn a total of  134.00  from holding Digia Oyj or generate 24.36% return on investment over 90 days.

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

Digia Oyj  vs.  Honkarakenne Oyj B

Digia Oyj

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digia Oyj are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Digia Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Honkarakenne Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honkarakenne Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Digia Oyj and Honkarakenne Oyj

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

The idea behind Digia Oyj and Honkarakenne Oyj B 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.