Correlation Between Kempower Oyj and Harvia Oyj

Can any of the company-specific risk be diversified away by investing in both Kempower Oyj and Harvia 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 Harvia 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 Harvia Oyj, you can compare the effects of market volatilities on Kempower Oyj and Harvia 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 Harvia Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kempower Oyj and Harvia Oyj.

Diversification Opportunities for Kempower Oyj and Harvia Oyj

0.42

Correlation Coefficient

Kempower Oyj  Harvia Oyj

Very weak diversification

The 3 months correlation between Kempower and Harvia is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kempower Oyj and Harvia Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvia 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 Harvia Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvia Oyj has no effect on the direction of Kempower Oyj i.e., Kempower Oyj and Harvia Oyj go up and down completely randomly.

Pair Corralation between Kempower Oyj and Harvia Oyj

Assuming the 90 days trading horizon Kempower Oyj is expected to under-perform the Harvia Oyj. In addition to that, Kempower Oyj is 1.64 times more volatile than Harvia Oyj. It trades about -0.01 of its total potential returns per unit of risk. Harvia Oyj is currently generating about 0.08 per unit of volatility. If you would invest  2,041  in Harvia Oyj on December 3, 2024 and sell it today you would earn a total of  2,564  from holding Harvia Oyj or generate 125.62% return on investment over 90 days.

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

Kempower Oyj  vs.  Harvia 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 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Kempower Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Harvia Oyj

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harvia Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Harvia 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 Harvia Oyj

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

The idea behind Kempower Oyj and Harvia 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.