Correlation Between Wartsila Oyj and Metsa Board

Can any of the company-specific risk be diversified away by investing in both Wartsila Oyj and Metsa Board 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 Metsa Board 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 Metsa Board Oyj, you can compare the effects of market volatilities on Wartsila Oyj and Metsa Board 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 Metsa Board. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wartsila Oyj and Metsa Board.

Diversification Opportunities for Wartsila Oyj and Metsa Board

0.13

Correlation Coefficient

Wartsila Oyj  Metsa Board

Average diversification

The 3 months correlation between Wartsila and Metsa is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Wartsila Oyj Abp and Metsa Board Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metsa Board 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 Metsa Board. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metsa Board Oyj has no effect on the direction of Wartsila Oyj i.e., Wartsila Oyj and Metsa Board go up and down completely randomly.

Pair Corralation between Wartsila Oyj and Metsa Board

Assuming the 90 days trading horizon Wartsila Oyj Abp is expected to generate 0.85 times more return on investment than Metsa Board. However, Wartsila Oyj Abp is 1.18 times less risky than Metsa Board. It trades about 0.06 of its potential returns per unit of risk. Metsa Board Oyj is currently generating about -0.01 per unit of risk. If you would invest  1,720  in Wartsila Oyj Abp on November 29, 2024 and sell it today you would earn a total of  107.00  from holding Wartsila Oyj Abp or generate 6.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Wartsila Oyj Abp  vs.  Metsa Board Oyj

Wartsila Oyj Abp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wartsila Oyj Abp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Wartsila Oyj may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Metsa Board Oyj

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Wartsila Oyj and Metsa Board

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

The idea behind Wartsila Oyj Abp and Metsa Board 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.