Correlation Between Trainers House and Detection Technology

Can any of the company-specific risk be diversified away by investing in both Trainers House and Detection Technology 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 Trainers House and Detection Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Trainers House and Detection Technology

0.72

Correlation Coefficient

Trainers House  Detection Technology

Poor diversification

The 3 months correlation between Trainers and Detection is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Trainers House Oyj and Detection Technology OY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Detection Technology and Trainers House 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 Trainers House Oyj are associated (or correlated) with Detection Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Detection Technology has no effect on the direction of Trainers House i.e., Trainers House and Detection Technology go up and down completely randomly.

Pair Corralation between Trainers House and Detection Technology

Assuming the 90 days trading horizon Trainers House is expected to generate 1.44 times less return on investment than Detection Technology. In addition to that, Trainers House is 1.06 times more volatile than Detection Technology OY. It trades about 0.07 of its total potential returns per unit of risk. Detection Technology OY is currently generating about 0.11 per unit of volatility. If you would invest  1,430  in Detection Technology OY on October 5, 2024 and sell it today you would earn a total of  65.00  from holding Detection Technology OY or generate 4.55% return on investment over 90 days.

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

Trainers House Oyj  vs.  Detection Technology OY

Trainers House Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

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

Detection Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Trainers House and Detection Technology

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

The idea behind Trainers House Oyj and Detection Technology OY 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.