Correlation Between Kempower Oyj and Remedy Entertainment

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

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

Diversification Opportunities for Kempower Oyj and Remedy Entertainment

0.85

Correlation Coefficient

Kempower Oyj  Remedy Entertainment

Very poor diversification

The 3 months correlation between Kempower and Remedy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kempower Oyj and Remedy Entertainment Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Remedy Entertainment 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 Remedy Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Remedy Entertainment Oyj has no effect on the direction of Kempower Oyj i.e., Kempower Oyj and Remedy Entertainment go up and down completely randomly.

Pair Corralation between Kempower Oyj and Remedy Entertainment

Assuming the 90 days trading horizon Kempower Oyj is expected to generate 1.34 times more return on investment than Remedy Entertainment. However, Kempower Oyj is 1.34 times more volatile than Remedy Entertainment Oyj. It trades about 0.25 of its potential returns per unit of risk. Remedy Entertainment Oyj is currently generating about 0.15 per unit of risk. If you would invest  932.00  in Kempower Oyj on October 9, 2024 and sell it today you would earn a total of  108.00  from holding Kempower Oyj or generate 11.59% return on investment over 90 days.

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

Kempower Oyj  vs.  Remedy Entertainment Oyj

Kempower Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kempower Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Kempower Oyj is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Remedy Entertainment Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Remedy Entertainment Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Kempower Oyj and Remedy Entertainment

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

The idea behind Kempower Oyj and Remedy Entertainment 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.