Correlation Between Ponsse Oyj and Wartsila Oyj

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

By analyzing existing cross correlation between Ponsse Oyj 1 and Wartsila Oyj Abp, you can compare the effects of market volatilities on Ponsse Oyj 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 Ponsse Oyj with a short position of Wartsila Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ponsse Oyj and Wartsila Oyj.

Diversification Opportunities for Ponsse Oyj and Wartsila Oyj

0.5

Correlation Coefficient

Ponsse Oyj  Wartsila Oyj

Very weak diversification

The 3 months correlation between Ponsse and Wartsila is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ponsse Oyj 1 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 Ponsse 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 Ponsse Oyj 1 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 Ponsse Oyj i.e., Ponsse Oyj and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Ponsse Oyj and Wartsila Oyj

Assuming the 90 days trading horizon Ponsse Oyj 1 is expected to generate 0.58 times more return on investment than Wartsila Oyj. However, Ponsse Oyj 1 is 1.73 times less risky than Wartsila Oyj. It trades about -0.07 of its potential returns per unit of risk. Wartsila Oyj Abp is currently generating about -0.09 per unit of risk. If you would invest  2,160  in Ponsse Oyj 1 on September 29, 2024 and sell it today you would lose (140.00) from holding Ponsse Oyj 1 or give up 6.48% of portfolio value over 90 days.

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

Ponsse Oyj 1  vs.  Wartsila Oyj Abp

Ponsse Oyj 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ponsse Oyj 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ponsse Oyj and Wartsila Oyj

The main advantage of trading using opposite Ponsse Oyj and Wartsila Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ponsse Oyj 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 Ponsse Oyj 1 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.