Correlation Between Stora Enso and Wartsila Oyj

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

Diversification Opportunities for Stora Enso and Wartsila Oyj

0.63

Correlation Coefficient

Stora Enso  Wartsila Oyj

Poor diversification

The 3 months correlation between Stora and Wartsila is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Stora Enso Oyj 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 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 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 Stora Enso i.e., Stora Enso and Wartsila Oyj go up and down completely randomly.

Pair Corralation between Stora Enso and Wartsila Oyj

Assuming the 90 days trading horizon Stora Enso is expected to generate 6.59 times less return on investment than Wartsila Oyj. But when comparing it to its historical volatility, Stora Enso Oyj is 1.07 times less risky than Wartsila Oyj. It trades about 0.01 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  1,107  in Wartsila Oyj Abp on November 20, 2024 and sell it today you would earn a total of  724.00  from holding Wartsila Oyj Abp or generate 65.4% return on investment over 90 days.

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

Stora Enso Oyj  vs.  Wartsila Oyj Abp

Stora Enso Oyj

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stora Enso Oyj are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Stora Enso demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Wartsila Oyj Abp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wartsila Oyj Abp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Wartsila Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Stora Enso and Wartsila Oyj

The main advantage of trading using opposite Stora Enso and Wartsila Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stora Enso 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 Stora Enso Oyj 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.