Correlation Between Telia Company and YIT Oyj

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

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

Diversification Opportunities for Telia Company and YIT Oyj

-0.04

Correlation Coefficient

Telia Company  YIT Oyj

Good diversification

The 3 months correlation between Telia and YIT is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Telia Company AB and YIT Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YIT Oyj and Telia Company 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 Telia Company AB are associated (or correlated) with YIT Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YIT Oyj has no effect on the direction of Telia Company i.e., Telia Company and YIT Oyj go up and down completely randomly.

Pair Corralation between Telia Company and YIT Oyj

Assuming the 90 days trading horizon Telia Company AB is expected to under-perform the YIT Oyj. But the stock apears to be less risky and, when comparing its historical volatility, Telia Company AB is 2.19 times less risky than YIT Oyj. The stock trades about -0.02 of its potential returns per unit of risk. The YIT Oyj is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  239.00  in YIT Oyj on October 25, 2024 and sell it today you would earn a total of  2.00  from holding YIT Oyj or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Telia Company AB  vs.  YIT Oyj

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

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

YIT Oyj

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in YIT Oyj are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, YIT Oyj is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Telia Company and YIT Oyj

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

The idea behind Telia Company AB and YIT 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.