Correlation Between Rayonier Advanced and Metso Outotec

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

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

Diversification Opportunities for Rayonier Advanced and Metso Outotec

-0.63

Correlation Coefficient

Rayonier Advanced  Metso Outotec

Excellent diversification

The 3 months correlation between Rayonier and Metso is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and Metso Outotec Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Outotec Oyj and Rayonier Advanced 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 Rayonier Advanced Materials are associated (or correlated) with Metso Outotec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Outotec Oyj has no effect on the direction of Rayonier Advanced i.e., Rayonier Advanced and Metso Outotec go up and down completely randomly.

Pair Corralation between Rayonier Advanced and Metso Outotec

Assuming the 90 days horizon Rayonier Advanced Materials is expected to under-perform the Metso Outotec. In addition to that, Rayonier Advanced is 1.99 times more volatile than Metso Outotec Oyj. It trades about -0.14 of its total potential returns per unit of risk. Metso Outotec Oyj is currently generating about 0.18 per unit of volatility. If you would invest  892.00  in Metso Outotec Oyj on December 21, 2024 and sell it today you would earn a total of  213.00  from holding Metso Outotec Oyj or generate 23.88% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  Metso Outotec Oyj

Rayonier Advanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Metso Outotec Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metso Outotec Oyj are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Metso Outotec reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rayonier Advanced and Metso Outotec

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

The idea behind Rayonier Advanced Materials and Metso Outotec 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.