Correlation Between Valmet Oyj and Kojamo

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

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

Diversification Opportunities for Valmet Oyj and Kojamo

0.66

Correlation Coefficient

Valmet Oyj  Kojamo

Poor diversification

The 3 months correlation between Valmet and Kojamo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Valmet Oyj and Kojamo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kojamo and Valmet 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 Valmet Oyj are associated (or correlated) with Kojamo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kojamo has no effect on the direction of Valmet Oyj i.e., Valmet Oyj and Kojamo go up and down completely randomly.

Pair Corralation between Valmet Oyj and Kojamo

Assuming the 90 days trading horizon Valmet Oyj is expected to under-perform the Kojamo. But the stock apears to be less risky and, when comparing its historical volatility, Valmet Oyj is 1.16 times less risky than Kojamo. The stock trades about -0.18 of its potential returns per unit of risk. The Kojamo is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,025  in Kojamo on October 3, 2024 and sell it today you would lose (86.00) from holding Kojamo or give up 8.39% of portfolio value over 90 days.

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

Valmet Oyj  vs.  Kojamo

Valmet Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valmet Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Kojamo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kojamo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Valmet Oyj and Kojamo

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

The idea behind Valmet Oyj and Kojamo 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.