Correlation Between Stora Enso and Terveystalo

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

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

Diversification Opportunities for Stora Enso and Terveystalo

-0.36

Correlation Coefficient

Stora Enso  Terveystalo

Very good diversification

The 3 months correlation between Stora and Terveystalo is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj and Terveystalo Oy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terveystalo Oy and Stora Enso 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 Stora Enso Oyj are associated (or correlated) with Terveystalo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terveystalo Oy has no effect on the direction of Stora Enso i.e., Stora Enso and Terveystalo go up and down completely randomly.

Pair Corralation between Stora Enso and Terveystalo

Assuming the 90 days trading horizon Stora Enso Oyj is expected to under-perform the Terveystalo. In addition to that, Stora Enso is 1.15 times more volatile than Terveystalo Oy. It trades about -0.02 of its total potential returns per unit of risk. Terveystalo Oy is currently generating about 0.07 per unit of volatility. If you would invest  665.00  in Terveystalo Oy on October 21, 2024 and sell it today you would earn a total of  437.00  from holding Terveystalo Oy or generate 65.71% return on investment over 90 days.

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

Stora Enso Oyj  vs.  Terveystalo Oy

Stora Enso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Stora Enso is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Terveystalo Oy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terveystalo Oy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Terveystalo may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stora Enso and Terveystalo

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

The idea behind Stora Enso Oyj and Terveystalo Oy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.