Correlation Between SSH Communications and Metso Oyj

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

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

Diversification Opportunities for SSH Communications and Metso Oyj

0.9

Correlation Coefficient

SSH Communications  Metso Oyj

Almost no diversification

The 3 months correlation between SSH and Metso is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding SSH Communications Security and Metso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metso Oyj and SSH Communications 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 SSH Communications Security are associated (or correlated) with Metso Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metso Oyj has no effect on the direction of SSH Communications i.e., SSH Communications and Metso Oyj go up and down completely randomly.

Pair Corralation between SSH Communications and Metso Oyj

Assuming the 90 days trading horizon SSH Communications is expected to generate 1.53 times less return on investment than Metso Oyj. But when comparing it to its historical volatility, SSH Communications Security is 1.03 times less risky than Metso Oyj. It trades about 0.05 of its potential returns per unit of risk. Metso Oyj is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  898.00  in Metso Oyj on December 29, 2024 and sell it today you would earn a total of  89.00  from holding Metso Oyj or generate 9.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

SSH Communications Security  vs.  Metso Oyj

SSH Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SSH Communications Security are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, SSH Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Metso Oyj

Risk-Adjusted Performance

Modest

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

Pair Trading with SSH Communications and Metso Oyj

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

The idea behind SSH Communications Security and Metso 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.