Correlation Between Sampo Oyj and Wartsila Oyj

Can any of the company-specific risk be diversified away by investing in both Sampo 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 Sampo 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 Sampo Oyj A and Wartsila Oyj Abp, you can compare the effects of market volatilities on Sampo 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 Sampo Oyj with a short position of Wartsila Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sampo Oyj and Wartsila Oyj.

Diversification Opportunities for Sampo Oyj and Wartsila Oyj

0.35

Correlation Coefficient

Sampo Oyj  Wartsila Oyj

Weak diversification

The 3 months correlation between Sampo and Wartsila is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sampo Oyj A 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 Sampo 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 Sampo Oyj A 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 Sampo Oyj i.e., Sampo Oyj and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Sampo Oyj and Wartsila Oyj

Assuming the 90 days trading horizon Sampo Oyj is expected to generate 2.64 times less return on investment than Wartsila Oyj. But when comparing it to its historical volatility, Sampo Oyj A is 1.96 times less risky than Wartsila Oyj. It trades about 0.06 of its potential returns per unit of risk. Wartsila Oyj Abp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,073  in Wartsila Oyj Abp on November 29, 2024 and sell it today you would earn a total of  813.00  from holding Wartsila Oyj Abp or generate 75.77% return on investment over 90 days.

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

Sampo Oyj A  vs.  Wartsila Oyj Abp

Sampo Oyj A

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sampo Oyj A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Sampo Oyj is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Wartsila Oyj Abp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wartsila Oyj Abp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Wartsila Oyj may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Sampo Oyj and Wartsila Oyj

The main advantage of trading using opposite Sampo Oyj and Wartsila Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampo 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 Sampo Oyj A 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.