Correlation Between Heeros Oyj and Solteq PLC

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

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

Diversification Opportunities for Heeros Oyj and Solteq PLC

-0.27

Correlation Coefficient

Heeros Oyj  Solteq PLC

Very good diversification

The 3 months correlation between Heeros and Solteq is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Heeros Oyj and Solteq PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solteq PLC and Heeros 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 Heeros Oyj are associated (or correlated) with Solteq PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solteq PLC has no effect on the direction of Heeros Oyj i.e., Heeros Oyj and Solteq PLC go up and down completely randomly.

Pair Corralation between Heeros Oyj and Solteq PLC

Assuming the 90 days trading horizon Heeros Oyj is expected to generate 0.31 times more return on investment than Solteq PLC. However, Heeros Oyj is 3.27 times less risky than Solteq PLC. It trades about 0.1 of its potential returns per unit of risk. Solteq PLC is currently generating about -0.03 per unit of risk. If you would invest  540.00  in Heeros Oyj on December 2, 2024 and sell it today you would earn a total of  25.00  from holding Heeros Oyj or generate 4.63% return on investment over 90 days.

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

Heeros Oyj  vs.  Solteq PLC

Heeros Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heeros Oyj are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Heeros Oyj is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Solteq PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solteq PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Solteq PLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heeros Oyj and Solteq PLC

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

The idea behind Heeros Oyj and Solteq PLC 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.