Correlation Between Rotork Plc and Wartsila Oyj

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

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

Diversification Opportunities for Rotork Plc and Wartsila Oyj

0.23

Correlation Coefficient

Rotork Plc  Wartsila Oyj

Modest diversification

The 3 months correlation between Rotork and Wartsila is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Rotork plc 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 Rotork Plc 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 Rotork plc 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 Rotork Plc i.e., Rotork Plc and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Rotork Plc and Wartsila Oyj

Assuming the 90 days horizon Rotork plc is expected to generate 1.61 times more return on investment than Wartsila Oyj. However, Rotork Plc is 1.61 times more volatile than Wartsila Oyj Abp. It trades about 0.05 of its potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.07 per unit of risk. If you would invest  377.00  in Rotork plc on December 27, 2024 and sell it today you would earn a total of  29.00  from holding Rotork plc or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Rotork plc  vs.  Wartsila Oyj Abp

Rotork plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rotork plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Rotork Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Wartsila Oyj Abp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wartsila Oyj Abp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Wartsila Oyj may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rotork Plc and Wartsila Oyj

The main advantage of trading using opposite Rotork Plc and Wartsila Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rotork Plc 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 Rotork plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.