Correlation Between Metso Oyj and Fodelia

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

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

Diversification Opportunities for Metso Oyj and Fodelia

-0.09

Correlation Coefficient

Metso Oyj  Fodelia

Good diversification

The 3 months correlation between Metso and Fodelia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj and Fodelia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fodelia and Metso 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 Metso Oyj are associated (or correlated) with Fodelia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fodelia has no effect on the direction of Metso Oyj i.e., Metso Oyj and Fodelia go up and down completely randomly.

Pair Corralation between Metso Oyj and Fodelia

Assuming the 90 days trading horizon Metso Oyj is expected to under-perform the Fodelia. In addition to that, Metso Oyj is 1.02 times more volatile than Fodelia. It trades about -0.02 of its total potential returns per unit of risk. Fodelia is currently generating about 0.04 per unit of volatility. If you would invest  584.00  in Fodelia on September 30, 2024 and sell it today you would earn a total of  46.00  from holding Fodelia or generate 7.88% return on investment over 90 days.

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

Metso Oyj  vs.  Fodelia

Metso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

Fodelia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fodelia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Fodelia is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metso Oyj and Fodelia

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

The idea behind Metso Oyj and Fodelia 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.