Correlation Between Honkarakenne Oyj and Digia Oyj

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

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

Diversification Opportunities for Honkarakenne Oyj and Digia Oyj

-0.72

Correlation Coefficient

Honkarakenne Oyj  Digia Oyj

Pay attention - limited upside

The 3 months correlation between Honkarakenne and Digia is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Honkarakenne Oyj B and Digia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digia Oyj and Honkarakenne 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 Honkarakenne Oyj B are associated (or correlated) with Digia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digia Oyj has no effect on the direction of Honkarakenne Oyj i.e., Honkarakenne Oyj and Digia Oyj go up and down completely randomly.

Pair Corralation between Honkarakenne Oyj and Digia Oyj

Assuming the 90 days trading horizon Honkarakenne Oyj B is expected to under-perform the Digia Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Honkarakenne Oyj B is 1.29 times less risky than Digia Oyj. The stock trades about -0.2 of its potential returns per unit of risk. The Digia Oyj is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  550.00  in Digia Oyj on October 10, 2024 and sell it today you would earn a total of  134.00  from holding Digia Oyj or generate 24.36% return on investment over 90 days.

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

Honkarakenne Oyj B  vs.  Digia Oyj

Honkarakenne Oyj B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honkarakenne Oyj B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Digia Oyj

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digia Oyj are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Digia Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honkarakenne Oyj and Digia Oyj

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

The idea behind Honkarakenne Oyj B and Digia 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.