Correlation Between Kempower Oyj and Fondia Oyj

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

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

Diversification Opportunities for Kempower Oyj and Fondia Oyj

0.01

Correlation Coefficient

Kempower Oyj  Fondia Oyj

Significant diversification

The 3 months correlation between Kempower and Fondia is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Kempower Oyj and Fondia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fondia Oyj and Kempower 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 Kempower Oyj are associated (or correlated) with Fondia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fondia Oyj has no effect on the direction of Kempower Oyj i.e., Kempower Oyj and Fondia Oyj go up and down completely randomly.

Pair Corralation between Kempower Oyj and Fondia Oyj

Assuming the 90 days trading horizon Kempower Oyj is expected to generate 1.68 times more return on investment than Fondia Oyj. However, Kempower Oyj is 1.68 times more volatile than Fondia Oyj. It trades about 0.15 of its potential returns per unit of risk. Fondia Oyj is currently generating about 0.03 per unit of risk. If you would invest  932.00  in Kempower Oyj on December 4, 2024 and sell it today you would earn a total of  329.00  from holding Kempower Oyj or generate 35.3% return on investment over 90 days.

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

Kempower Oyj  vs.  Fondia Oyj

Kempower Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kempower Oyj are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Kempower Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Fondia Oyj

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fondia Oyj are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fondia Oyj is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kempower Oyj and Fondia Oyj

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

The idea behind Kempower Oyj and Fondia 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 Anywhere module to track or share privately all of your investments from the convenience of any device.