Correlation Between Outokumpu Oyj and NoHo Partners

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

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

Diversification Opportunities for Outokumpu Oyj and NoHo Partners

0.96

Correlation Coefficient

Outokumpu Oyj  NoHo Partners

Almost no diversification

The 3 months correlation between Outokumpu and NoHo is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj and NoHo Partners Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NoHo Partners Oyj and Outokumpu 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 Outokumpu Oyj are associated (or correlated) with NoHo Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NoHo Partners Oyj has no effect on the direction of Outokumpu Oyj i.e., Outokumpu Oyj and NoHo Partners go up and down completely randomly.

Pair Corralation between Outokumpu Oyj and NoHo Partners

Assuming the 90 days trading horizon Outokumpu Oyj is expected to generate 1.21 times more return on investment than NoHo Partners. However, Outokumpu Oyj is 1.21 times more volatile than NoHo Partners Oyj. It trades about 0.25 of its potential returns per unit of risk. NoHo Partners Oyj is currently generating about 0.19 per unit of risk. If you would invest  281.00  in Outokumpu Oyj on December 22, 2024 and sell it today you would earn a total of  97.00  from holding Outokumpu Oyj or generate 34.52% return on investment over 90 days.

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

Outokumpu Oyj  vs.  NoHo Partners Oyj

Outokumpu Oyj

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Outokumpu Oyj are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Outokumpu Oyj demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NoHo Partners Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NoHo Partners Oyj are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, NoHo Partners exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Outokumpu Oyj and NoHo Partners

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

The idea behind Outokumpu Oyj and NoHo Partners 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.