Correlation Between Metsa Board and Wartsila Oyj

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

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

Diversification Opportunities for Metsa Board and Wartsila Oyj

0.13

Correlation Coefficient

Metsa Board  Wartsila Oyj

Average diversification

The 3 months correlation between Metsa and Wartsila is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Metsa Board Oyj and Wartsila Oyj Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wartsila Oyj Abp and Metsa Board 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 Metsa Board Oyj are associated (or correlated) with Wartsila Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wartsila Oyj Abp has no effect on the direction of Metsa Board i.e., Metsa Board and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Metsa Board and Wartsila Oyj

Assuming the 90 days trading horizon Metsa Board Oyj is expected to under-perform the Wartsila Oyj. In addition to that, Metsa Board is 1.18 times more volatile than Wartsila Oyj Abp. It trades about -0.01 of its total potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.06 per unit of volatility. If you would invest  1,720  in Wartsila Oyj Abp on November 29, 2024 and sell it today you would earn a total of  107.00  from holding Wartsila Oyj Abp or generate 6.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Metsa Board Oyj  vs.  Wartsila Oyj Abp

Metsa Board Oyj

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metsa Board Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Metsa Board is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Wartsila Oyj Abp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wartsila Oyj Abp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Wartsila Oyj may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Metsa Board and Wartsila Oyj

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

The idea behind Metsa Board Oyj and Wartsila Oyj Abp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.