Correlation Between Tokmanni Group and Alandsbanken Abp

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

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

Diversification Opportunities for Tokmanni Group and Alandsbanken Abp

-0.37

Correlation Coefficient

Tokmanni Group  Alandsbanken Abp

Very good diversification

The 3 months correlation between Tokmanni and Alandsbanken is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tokmanni Group Oyj and Alandsbanken Abp B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alandsbanken Abp B and Tokmanni Group 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 Tokmanni Group Oyj are associated (or correlated) with Alandsbanken Abp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alandsbanken Abp B has no effect on the direction of Tokmanni Group i.e., Tokmanni Group and Alandsbanken Abp go up and down completely randomly.

Pair Corralation between Tokmanni Group and Alandsbanken Abp

Assuming the 90 days trading horizon Tokmanni Group Oyj is expected to generate 2.82 times more return on investment than Alandsbanken Abp. However, Tokmanni Group is 2.82 times more volatile than Alandsbanken Abp B. It trades about 0.09 of its potential returns per unit of risk. Alandsbanken Abp B is currently generating about -0.07 per unit of risk. If you would invest  1,053  in Tokmanni Group Oyj on September 2, 2024 and sell it today you would earn a total of  129.00  from holding Tokmanni Group Oyj or generate 12.25% return on investment over 90 days.

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

Tokmanni Group Oyj  vs.  Alandsbanken Abp B

Tokmanni Group Oyj

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokmanni Group Oyj are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, Tokmanni Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Alandsbanken Abp B

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tokmanni Group and Alandsbanken Abp

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

The idea behind Tokmanni Group Oyj and Alandsbanken Abp B 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.