Correlation Between Talenom Oyj and Aallon Group

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

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

Diversification Opportunities for Talenom Oyj and Aallon Group

0.76

Correlation Coefficient

Talenom Oyj  Aallon Group

Poor diversification

The 3 months correlation between Talenom and Aallon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Talenom Oyj and Aallon Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aallon Group Oyj and Talenom 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 Talenom Oyj are associated (or correlated) with Aallon Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aallon Group Oyj has no effect on the direction of Talenom Oyj i.e., Talenom Oyj and Aallon Group go up and down completely randomly.

Pair Corralation between Talenom Oyj and Aallon Group

Assuming the 90 days trading horizon Talenom Oyj is expected to under-perform the Aallon Group. In addition to that, Talenom Oyj is 1.82 times more volatile than Aallon Group Oyj. It trades about -0.02 of its total potential returns per unit of risk. Aallon Group Oyj is currently generating about 0.05 per unit of volatility. If you would invest  850.00  in Aallon Group Oyj on October 9, 2024 and sell it today you would earn a total of  28.00  from holding Aallon Group Oyj or generate 3.29% return on investment over 90 days.

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

Talenom Oyj  vs.  Aallon Group Oyj

Talenom Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talenom Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Talenom Oyj is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Aallon Group Oyj

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aallon Group Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Aallon Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Talenom Oyj and Aallon Group

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

The idea behind Talenom Oyj and Aallon 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.