Correlation Between Kemira Oyj and Wartsila Oyj

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

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

Diversification Opportunities for Kemira Oyj and Wartsila Oyj

0.9

Correlation Coefficient

Kemira Oyj  Wartsila Oyj

Almost no diversification

The 3 months correlation between Kemira and Wartsila is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Kemira Oyj and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp and Kemira 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 Kemira Oyj are associated (or correlated) with Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Kemira Oyj i.e., Kemira Oyj and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Kemira Oyj and Wartsila Oyj

Assuming the 90 days trading horizon Kemira Oyj is expected to generate 1.04 times more return on investment than Wartsila Oyj. However, Kemira Oyj is 1.04 times more volatile than Wartsila Oyj Abp. It trades about 0.02 of its potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.01 per unit of risk. If you would invest  1,970  in Kemira Oyj on October 8, 2024 and sell it today you would earn a total of  5.00  from holding Kemira Oyj or generate 0.25% return on investment over 90 days.

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

Kemira Oyj  vs.  Wartsila Oyj Abp

Kemira Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kemira Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kemira Oyj and Wartsila Oyj

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

The idea behind Kemira Oyj and Wartsila Oyj Abp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.