Correlation Between Tecnotree Oyj and Afarak Group

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

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

Diversification Opportunities for Tecnotree Oyj and Afarak Group

0.66

Correlation Coefficient

Tecnotree Oyj  Afarak Group

Poor diversification

The 3 months correlation between Tecnotree and Afarak is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Tecnotree Oyj and Afarak Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Afarak Group Oyj and Tecnotree Oyj 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 Tecnotree Oyj are associated (or correlated) with Afarak Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Afarak Group Oyj has no effect on the direction of Tecnotree Oyj i.e., Tecnotree Oyj and Afarak Group go up and down completely randomly.

Pair Corralation between Tecnotree Oyj and Afarak Group

Assuming the 90 days trading horizon Tecnotree Oyj is expected to under-perform the Afarak Group. But the stock apears to be less risky and, when comparing its historical volatility, Tecnotree Oyj is 1.12 times less risky than Afarak Group. The stock trades about -0.23 of its potential returns per unit of risk. The Afarak Group Oyj is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Afarak Group Oyj on September 2, 2024 and sell it today you would lose (2.00) from holding Afarak Group Oyj or give up 7.41% of portfolio value over 90 days.

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

Tecnotree Oyj  vs.  Afarak Group Oyj

Tecnotree Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tecnotree Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Afarak Group Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tecnotree Oyj and Afarak Group

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

The idea behind Tecnotree Oyj and Afarak Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.