Correlation Between HKFoods Oyj and Detection Technology

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

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

Diversification Opportunities for HKFoods Oyj and Detection Technology

0.63

Correlation Coefficient

HKFoods Oyj  Detection Technology

Poor diversification

The 3 months correlation between HKFoods and Detection is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding HKFoods Oyj A and Detection Technology OY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Detection Technology and HKFoods 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 HKFoods Oyj A are associated (or correlated) with Detection Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Detection Technology has no effect on the direction of HKFoods Oyj i.e., HKFoods Oyj and Detection Technology go up and down completely randomly.

Pair Corralation between HKFoods Oyj and Detection Technology

Assuming the 90 days trading horizon HKFoods Oyj A is expected to generate 1.4 times more return on investment than Detection Technology. However, HKFoods Oyj is 1.4 times more volatile than Detection Technology OY. It trades about 0.17 of its potential returns per unit of risk. Detection Technology OY is currently generating about 0.08 per unit of risk. If you would invest  82.00  in HKFoods Oyj A on November 29, 2024 and sell it today you would earn a total of  25.00  from holding HKFoods Oyj A or generate 30.49% return on investment over 90 days.

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

HKFoods Oyj A  vs.  Detection Technology OY

HKFoods Oyj A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HKFoods Oyj A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, HKFoods Oyj unveiled solid returns over the last few months and may actually be approaching a breakup point.

Detection Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Detection Technology OY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Detection Technology may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with HKFoods Oyj and Detection Technology

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

The idea behind HKFoods Oyj A and Detection Technology OY 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.