Correlation Between Lassila Tikanoja and YIT Oyj

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

Diversification Opportunities for Lassila Tikanoja and YIT Oyj

0.52

Correlation Coefficient

Lassila Tikanoja  YIT Oyj

Very weak diversification

The 3 months correlation between Lassila and YIT is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lassila Tikanoja Oyj and YIT Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YIT Oyj 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 YIT Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YIT Oyj has no effect on the direction of Lassila Tikanoja i.e., Lassila Tikanoja and YIT Oyj go up and down completely randomly.

Pair Corralation between Lassila Tikanoja and YIT Oyj

Assuming the 90 days trading horizon Lassila Tikanoja Oyj is expected to under-perform the YIT Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Lassila Tikanoja Oyj is 2.2 times less risky than YIT Oyj. The stock trades about -0.04 of its potential returns per unit of risk. The YIT Oyj is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  249.00  in YIT Oyj on October 10, 2024 and sell it today you would lose (3.00) from holding YIT Oyj or give up 1.2% of portfolio value over 90 days.

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

Lassila Tikanoja Oyj  vs.  YIT Oyj

Lassila Tikanoja Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lassila Tikanoja Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

YIT Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days YIT Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, YIT Oyj is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Lassila Tikanoja and YIT Oyj

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

The idea behind Lassila Tikanoja Oyj and YIT 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.