Correlation Between Digia Oyj and Scanfil Oyj

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

Diversification Opportunities for Digia Oyj and Scanfil Oyj

0.36

Correlation Coefficient

Digia Oyj  Scanfil Oyj

Weak diversification

The 3 months correlation between Digia and Scanfil is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Digia Oyj and Scanfil Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scanfil Oyj 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 Scanfil Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scanfil Oyj has no effect on the direction of Digia Oyj i.e., Digia Oyj and Scanfil Oyj go up and down completely randomly.

Pair Corralation between Digia Oyj and Scanfil Oyj

Assuming the 90 days trading horizon Digia Oyj is expected to generate 2.6 times less return on investment than Scanfil Oyj. But when comparing it to its historical volatility, Digia Oyj is 1.01 times less risky than Scanfil Oyj. It trades about 0.04 of its potential returns per unit of risk. Scanfil Oyj is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  820.00  in Scanfil Oyj on December 24, 2024 and sell it today you would earn a total of  100.00  from holding Scanfil Oyj or generate 12.2% return on investment over 90 days.

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

Digia Oyj  vs.  Scanfil Oyj

Digia Oyj

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Digia Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Digia Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Scanfil Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scanfil Oyj are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Scanfil Oyj sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Digia Oyj and Scanfil Oyj

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

The idea behind Digia Oyj and Scanfil 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.