Correlation Between Lassila Tikanoja and Ponsse Oyj

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

By analyzing existing cross correlation between Lassila Tikanoja Oyj and Ponsse Oyj 1, you can compare the effects of market volatilities on Lassila Tikanoja and Ponsse 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 Lassila Tikanoja with a short position of Ponsse Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lassila Tikanoja and Ponsse Oyj.

Diversification Opportunities for Lassila Tikanoja and Ponsse Oyj

0.86

Correlation Coefficient

Lassila Tikanoja  Ponsse Oyj

Very poor diversification

The 3 months correlation between Lassila and Ponsse is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Lassila Tikanoja Oyj and Ponsse Oyj 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ponsse Oyj 1 and Lassila Tikanoja 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 Lassila Tikanoja Oyj are associated (or correlated) with Ponsse Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ponsse Oyj 1 has no effect on the direction of Lassila Tikanoja i.e., Lassila Tikanoja and Ponsse Oyj go up and down completely randomly.

Pair Corralation between Lassila Tikanoja and Ponsse Oyj

Assuming the 90 days trading horizon Lassila Tikanoja is expected to generate 2.44 times less return on investment than Ponsse Oyj. But when comparing it to its historical volatility, Lassila Tikanoja Oyj is 2.0 times less risky than Ponsse Oyj. It trades about 0.21 of its potential returns per unit of risk. Ponsse Oyj 1 is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,020  in Ponsse Oyj 1 on December 24, 2024 and sell it today you would earn a total of  750.00  from holding Ponsse Oyj 1 or generate 37.13% return on investment over 90 days.

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

Lassila Tikanoja Oyj  vs.  Ponsse Oyj 1

Lassila Tikanoja Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lassila Tikanoja Oyj are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Lassila Tikanoja demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Ponsse Oyj 1

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ponsse Oyj 1 are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Ponsse Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lassila Tikanoja and Ponsse Oyj

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

The idea behind Lassila Tikanoja Oyj and Ponsse Oyj 1 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.