Correlation Between Outokumpu Oyj and Mesabi Trust

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

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

Diversification Opportunities for Outokumpu Oyj and Mesabi Trust

-0.56

Correlation Coefficient

Outokumpu Oyj  Mesabi Trust

Excellent diversification

The 3 months correlation between Outokumpu and Mesabi is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Outokumpu Oyj ADR and Mesabi Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesabi Trust 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 ADR are associated (or correlated) with Mesabi Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesabi Trust has no effect on the direction of Outokumpu Oyj i.e., Outokumpu Oyj and Mesabi Trust go up and down completely randomly.

Pair Corralation between Outokumpu Oyj and Mesabi Trust

Assuming the 90 days horizon Outokumpu Oyj ADR is expected to under-perform the Mesabi Trust. But the pink sheet apears to be less risky and, when comparing its historical volatility, Outokumpu Oyj ADR is 1.95 times less risky than Mesabi Trust. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Mesabi Trust is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,751  in Mesabi Trust on September 3, 2024 and sell it today you would earn a total of  1,025  from holding Mesabi Trust or generate 58.54% return on investment over 90 days.

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

Outokumpu Oyj ADR  vs.  Mesabi Trust

Outokumpu Oyj ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outokumpu Oyj ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Mesabi Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Outokumpu Oyj and Mesabi Trust

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

The idea behind Outokumpu Oyj ADR and Mesabi Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..