Correlation Between Metso Oyj and Nightingale Health

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

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

Diversification Opportunities for Metso Oyj and Nightingale Health

0.1

Correlation Coefficient

Metso Oyj  Nightingale Health

Average diversification

The 3 months correlation between Metso and Nightingale is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Metso Oyj and Nightingale Health Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nightingale Health Oyj 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 Nightingale Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nightingale Health Oyj has no effect on the direction of Metso Oyj i.e., Metso Oyj and Nightingale Health go up and down completely randomly.

Pair Corralation between Metso Oyj and Nightingale Health

Assuming the 90 days trading horizon Metso Oyj is expected to under-perform the Nightingale Health. But the stock apears to be less risky and, when comparing its historical volatility, Metso Oyj is 1.74 times less risky than Nightingale Health. The stock trades about -0.13 of its potential returns per unit of risk. The Nightingale Health Oyj is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  288.00  in Nightingale Health Oyj on October 9, 2024 and sell it today you would earn a total of  14.00  from holding Nightingale Health Oyj or generate 4.86% return on investment over 90 days.

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

Metso Oyj  vs.  Nightingale Health Oyj

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 recent stock price confusion, may contribute to short-horizon losses for the traders.

Nightingale Health Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nightingale Health Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nightingale Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Metso Oyj and Nightingale Health

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

The idea behind Metso Oyj and Nightingale Health 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.