Correlation Between Vaisala Oyj and Purmo Group

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

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

Diversification Opportunities for Vaisala Oyj and Purmo Group

-0.03

Correlation Coefficient

Vaisala Oyj  Purmo Group

Good diversification

The 3 months correlation between Vaisala and Purmo is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vaisala Oyj A and Purmo Group Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Purmo Group Oyj and Vaisala 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 Vaisala Oyj A are associated (or correlated) with Purmo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Purmo Group Oyj has no effect on the direction of Vaisala Oyj i.e., Vaisala Oyj and Purmo Group go up and down completely randomly.

Pair Corralation between Vaisala Oyj and Purmo Group

Assuming the 90 days trading horizon Vaisala Oyj A is expected to generate 1.98 times more return on investment than Purmo Group. However, Vaisala Oyj is 1.98 times more volatile than Purmo Group Oyj. It trades about 0.15 of its potential returns per unit of risk. Purmo Group Oyj is currently generating about 0.14 per unit of risk. If you would invest  4,850  in Vaisala Oyj A on October 8, 2024 and sell it today you would earn a total of  130.00  from holding Vaisala Oyj A or generate 2.68% return on investment over 90 days.

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

Vaisala Oyj A  vs.  Purmo Group Oyj

Vaisala Oyj A

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vaisala Oyj A are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Vaisala Oyj is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Purmo Group Oyj

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Purmo Group Oyj are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Purmo 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 Vaisala Oyj and Purmo Group

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

The idea behind Vaisala Oyj A and Purmo 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.