Correlation Between Remedy Entertainment and Kempower Oyj

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

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

Diversification Opportunities for Remedy Entertainment and Kempower Oyj

0.28

Correlation Coefficient

Remedy Entertainment  Kempower Oyj

Modest diversification

The 3 months correlation between Remedy and Kempower is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Remedy Entertainment Oyj and Kempower Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kempower Oyj and Remedy Entertainment 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 Remedy Entertainment Oyj are associated (or correlated) with Kempower Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kempower Oyj has no effect on the direction of Remedy Entertainment i.e., Remedy Entertainment and Kempower Oyj go up and down completely randomly.

Pair Corralation between Remedy Entertainment and Kempower Oyj

Assuming the 90 days trading horizon Remedy Entertainment is expected to generate 21.57 times less return on investment than Kempower Oyj. But when comparing it to its historical volatility, Remedy Entertainment Oyj is 1.7 times less risky than Kempower Oyj. It trades about 0.01 of its potential returns per unit of risk. Kempower Oyj is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  996.00  in Kempower Oyj on December 26, 2024 and sell it today you would earn a total of  314.00  from holding Kempower Oyj or generate 31.53% return on investment over 90 days.

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

Remedy Entertainment Oyj  vs.  Kempower Oyj

Remedy Entertainment Oyj

Risk-Adjusted Performance

Very Weak

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

Kempower Oyj

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kempower Oyj are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Kempower Oyj reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Remedy Entertainment and Kempower Oyj

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

The idea behind Remedy Entertainment Oyj and Kempower 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.