Correlation Between EQ Oyj and Citycon Oyj

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

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

Diversification Opportunities for EQ Oyj and Citycon Oyj

0.86

Correlation Coefficient

EQ Oyj  Citycon Oyj

Very poor diversification

The 3 months correlation between EQV1V and Citycon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding eQ Oyj and Citycon Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citycon Oyj and EQ 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 eQ Oyj are associated (or correlated) with Citycon Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citycon Oyj has no effect on the direction of EQ Oyj i.e., EQ Oyj and Citycon Oyj go up and down completely randomly.

Pair Corralation between EQ Oyj and Citycon Oyj

Assuming the 90 days trading horizon eQ Oyj is expected to generate 0.61 times more return on investment than Citycon Oyj. However, eQ Oyj is 1.65 times less risky than Citycon Oyj. It trades about -0.21 of its potential returns per unit of risk. Citycon Oyj is currently generating about -0.24 per unit of risk. If you would invest  1,405  in eQ Oyj on September 30, 2024 and sell it today you would lose (170.00) from holding eQ Oyj or give up 12.1% of portfolio value over 90 days.

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

eQ Oyj  vs.  Citycon Oyj

eQ Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eQ Oyj 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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Citycon Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citycon Oyj 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 January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with EQ Oyj and Citycon Oyj

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

The idea behind eQ Oyj and Citycon 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.