Correlation Between Wartsila Oyj and Kesko Oyj

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

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

Diversification Opportunities for Wartsila Oyj and Kesko Oyj

-0.5

Correlation Coefficient

Wartsila Oyj  Kesko Oyj

Very good diversification

The 3 months correlation between Wartsila and Kesko is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Kesko Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kesko Oyj and Wartsila 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 Wartsila Oyj Abp are associated (or correlated) with Kesko Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kesko Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Kesko Oyj go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Kesko Oyj

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to under-perform the Kesko Oyj. In addition to that, Wartsila Oyj is 1.47 times more volatile than Kesko Oyj. It trades about -0.06 of its total potential returns per unit of risk. Kesko Oyj is currently generating about 0.04 per unit of volatility. If you would invest  1,819  in Kesko Oyj on September 3, 2024 and sell it today you would earn a total of  63.00  from holding Kesko Oyj or generate 3.46% return on investment over 90 days.

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

Wartsila Oyj Abp  vs.  Kesko Oyj

Wartsila Oyj Abp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wartsila Oyj Abp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Kesko Oyj

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kesko Oyj are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kesko Oyj is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wartsila Oyj and Kesko Oyj

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

The idea behind Wartsila Oyj Abp and Kesko 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.