Correlation Between Sotkamo Silver and Sanoma Oyj

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

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

Diversification Opportunities for Sotkamo Silver and Sanoma Oyj

-0.19

Correlation Coefficient

Sotkamo Silver  Sanoma Oyj

Good diversification

The 3 months correlation between Sotkamo and Sanoma is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sotkamo Silver AB and Sanoma Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanoma Oyj and Sotkamo Silver 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 Sotkamo Silver AB are associated (or correlated) with Sanoma Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanoma Oyj has no effect on the direction of Sotkamo Silver i.e., Sotkamo Silver and Sanoma Oyj go up and down completely randomly.

Pair Corralation between Sotkamo Silver and Sanoma Oyj

Assuming the 90 days trading horizon Sotkamo Silver AB is expected to generate 3.27 times more return on investment than Sanoma Oyj. However, Sotkamo Silver is 3.27 times more volatile than Sanoma Oyj. It trades about 0.1 of its potential returns per unit of risk. Sanoma Oyj is currently generating about 0.29 per unit of risk. If you would invest  8.79  in Sotkamo Silver AB on October 24, 2024 and sell it today you would earn a total of  0.55  from holding Sotkamo Silver AB or generate 6.26% return on investment over 90 days.

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

Sotkamo Silver AB  vs.  Sanoma Oyj

Sotkamo Silver AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sotkamo Silver AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Sotkamo Silver is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Sanoma Oyj

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sanoma Oyj are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sanoma Oyj sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sotkamo Silver and Sanoma Oyj

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

The idea behind Sotkamo Silver AB and Sanoma 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.