Correlation Between Solteq PLC and Purmo Group

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

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

Diversification Opportunities for Solteq PLC and Purmo Group

-0.26

Correlation Coefficient

Solteq PLC  Purmo Group

Very good diversification

The 3 months correlation between Solteq and Purmo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Solteq PLC and Purmo Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purmo Group Oyj and Solteq 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 Solteq PLC are associated (or correlated) with Purmo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purmo Group Oyj has no effect on the direction of Solteq PLC i.e., Solteq PLC and Purmo Group go up and down completely randomly.

Pair Corralation between Solteq PLC and Purmo Group

Assuming the 90 days trading horizon Solteq PLC is expected to under-perform the Purmo Group. In addition to that, Solteq PLC is 3.95 times more volatile than Purmo Group Oyj. It trades about -0.06 of its total potential returns per unit of risk. Purmo Group Oyj is currently generating about -0.06 per unit of volatility. If you would invest  1,210  in Purmo Group Oyj on October 21, 2024 and sell it today you would lose (70.00) from holding Purmo Group Oyj or give up 5.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.75%
Values	Daily Returns

Solteq PLC  vs.  Purmo Group Oyj

Solteq PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Purmo Group Oyj

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Purmo Group Oyj are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Purmo Group is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Solteq PLC and Purmo Group

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

The idea behind Solteq PLC and Purmo Group 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.