Correlation Between Fondia Oyj and Aallon Group

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

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

Diversification Opportunities for Fondia Oyj and Aallon Group

-0.5

Correlation Coefficient

Fondia Oyj  Aallon Group

Very good diversification

The 3 months correlation between Fondia and Aallon is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Fondia Oyj and Aallon Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aallon Group Oyj and Fondia 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 Fondia Oyj are associated (or correlated) with Aallon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aallon Group Oyj has no effect on the direction of Fondia Oyj i.e., Fondia Oyj and Aallon Group go up and down completely randomly.

Pair Corralation between Fondia Oyj and Aallon Group

Assuming the 90 days trading horizon Fondia Oyj is expected to under-perform the Aallon Group. In addition to that, Fondia Oyj is 1.37 times more volatile than Aallon Group Oyj. It trades about -0.18 of its total potential returns per unit of risk. Aallon Group Oyj is currently generating about 0.11 per unit of volatility. If you would invest  836.00  in Aallon Group Oyj on October 24, 2024 and sell it today you would earn a total of  88.00  from holding Aallon Group Oyj or generate 10.53% return on investment over 90 days.

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

Fondia Oyj  vs.  Aallon Group Oyj

Fondia Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fondia 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 basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Aallon Group Oyj

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aallon Group Oyj are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Aallon Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fondia Oyj and Aallon Group

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

The idea behind Fondia Oyj and Aallon Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.