Correlation Between Terveystalo and Tokmanni Group

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

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

Diversification Opportunities for Terveystalo and Tokmanni Group

0.74

Correlation Coefficient

Terveystalo  Tokmanni Group

Poor diversification

The 3 months correlation between Terveystalo and Tokmanni is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Terveystalo Oy and Tokmanni Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokmanni Group Oyj and Terveystalo 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 Terveystalo Oy are associated (or correlated) with Tokmanni Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokmanni Group Oyj has no effect on the direction of Terveystalo i.e., Terveystalo and Tokmanni Group go up and down completely randomly.

Pair Corralation between Terveystalo and Tokmanni Group

Assuming the 90 days trading horizon Terveystalo is expected to generate 1.33 times less return on investment than Tokmanni Group. But when comparing it to its historical volatility, Terveystalo Oy is 1.53 times less risky than Tokmanni Group. It trades about 0.14 of its potential returns per unit of risk. Tokmanni Group Oyj is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,040  in Tokmanni Group Oyj on October 3, 2024 and sell it today you would earn a total of  171.00  from holding Tokmanni Group Oyj or generate 16.44% return on investment over 90 days.

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

Terveystalo Oy  vs.  Tokmanni Group Oyj

Terveystalo Oy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terveystalo Oy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Terveystalo demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tokmanni Group Oyj

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokmanni Group Oyj are ranked lower than 9 (%) 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.

Pair Trading with Terveystalo and Tokmanni Group

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

The idea behind Terveystalo Oy and Tokmanni 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.